CrowdStrike on Tuesday night reported better-than-expected third-quarter fiscal 2026 results and forward-looking results. But that number wasn’t enough to boost the stock, considering it’s up about 24% since the cybersecurity company’s second-quarter earnings release in late August. That said, the latest beat and raise should solidify the stock’s recent gains and set the stage for further gains next year. Third-quarter sales rose 22% year over year to $1.23 billion, beating the consensus estimate of $1.22 billion compiled by market data provider LSEG. Adjusted earnings per share (EPS) for the three months ended Oct. 31 rose to 96 cents, beating expectations of 94 cents, LSEG said. Why we own it Cybersecurity is a must for businesses in the digital age. CrowdStrike, led by co-founder and CEO George Kurtz, is one of the best companies in existence, along with its fellow club name Palo Alto Networks. The company specializes in endpoint protection through its AI-native platform called Falcon. Competitors: Palo Alto Networks, Fortinet, SentinelOne, Microsoft Portfolio Weight: 3.33% Latest Purchase Date: March 10, 2025 Start Date: October 16, 2024 Conclusion The October quarter was CrowdStrike’s encore performance, with operating cash flow, adjusted operating income, EPS, and free cash. Flows and net amounts reached record highs, delivering results that exceeded expectations across the board. New annual recurring revenue. The Falcon Flex subscription model is clearly driving business growth, with annual recurring revenue (ARR) associated with these accounts surging over 200% year-over-year. Falcon Flex allows customers to quickly deploy additional protection as needed without all the hassle of going through often lengthy procurement processes. Artificial intelligence benefits CrowdStrike in two ways. One is to increase attack vectors on customers’ digital infrastructure to increase demand, and the other is to enhance pricing power and cross-selling by increasing CrowdStrike’s ability to protect customers from these attacks. As CEO George Kurtz said on a post-earnings conference call, “Every day, companies are witnessing shocking moments of AI-powered adversarial tradecraft. … Just as anyone can now use AI to vibrate code and become a software engineer, anyone can vibrate and become a sophisticated AI-powered adversary.” He added that CrowdStrike is mission-critical. “No matter how markets move, no matter how geopolitical tensions evolve, no matter what technology trends, our digital society mandates cybersecurity as a necessity, and now, more than ever, CrowdStrike is synonymous with that necessity.” The approach talks about what these companies can offer. As attacks become more sophisticated and frequent, businesses can no longer afford piecemeal solutions to cybersecurity. “Cybersecurity in the agent era requires a single platform,” Kurtz said. “To be able to operate with agility, effectiveness, and speed to stop breaches, it’s important to have the data and actions you control on a single platform rather than multiple platforms. Because if you have multiple platforms, by definition you don’t have a platform. Tap switching and contact switching have a cost in time. These are the seams and cracks that attackers thrive on. Kurtz’s comments about the “age of agents” refer to digital AI agents that can perform complex tasks and solve problems with little or no human oversight. The proliferation of AI agents has exponentially increased the ways hackers can penetrate systems. In mid-September, at CrowdStrike’s Fal.Con industry conference, the CEO said the rise of agent AI is a “100x opportunity for CrowdStrike.” Given the third-quarter results, strong outlook, and our long-term view that cybersecurity is a long-term growth industry benefiting from the need to defend against AI-powered hackers using AI protection tools, we reiterate our 1 rating and raise CrowdStrike’s price target from $520 to $550 per share. CrowdStrike stock fell 3% in after-hours trading, but was up 51% as of Tuesday’s market close. Quarterly Commentary Perhaps the most interesting metric, indicating the sustainability of the strong performance seen in Tuesday night’s results, was $265 million in net new annual recurring revenue. As a result, ARR at the end of the period was $4.92 billion, an increase of 23% year over year and an increase of 5.7% sequentially. This growth was driven by Falcon Flex, with management noting that nearly 30% of final ARR, or $1.35 billion, came from accounts that adopted the new pricing model. Kurtz said on the conference call that the number of customers who “reflexively” signed up, or re-signed after their credit was depleted, has since more than doubled to more than 200, with 10 of those customers “reflexively signing up for more than twice their initial flex contract.” Due to the strong response, management expects the Falcon Flex model to become the company’s licensing standard. Guidance For the full year 2026, CrowdStrike management has raised its guidance at the midpoint. The team now expects revenue to be between $4,796.6 million and $4,086.6 million, up from $4,749.5 million and $4,855 million previously. By comparison, LSEG’s consensus estimate is $4.784 billion. Adjusted earnings guidance has also been raised, and the team is now targeting an EPS range of $3.70 to $3.72, up from the previous $3.60 to $3.72 and comfortably above LSEG’s estimate of $3.67. For the ongoing fourth quarter of fiscal 2026, management is guiding for revenue to be between $1.29 billion and $1.3 billion, better than the $1.293 billion the Street was looking for at the midpoint, LSEG said. Adjusted EPS is expected to be between $1.09 and $1.11, better than the $1.08 the Street was expecting. (Jim Cramer’s Charitable Trust is long CRWD, PANW. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. 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