Published
10/10/2024, 15:06The market for cloud services is snowballing as companies are actively adopting this technology. In 2023, according to Edge Delta, more than 94% of companies worldwide applied cloud computing, and it is predicted that by 2025, nearly 50% of all data will be stored in the cloud.
As companies continue to move mission-critical operations to the cloud, the demand for robust cybersecurity solutions is higher than ever. Today, one of the leaders in cloud cybersecurity is CrowdStrike Holdings Inc. (CRWD). Because of this, it has attracted the attention of both enterprises looking for solutions for their business and investors.
The material is not a call to buy CrowdStrike shares. Royal Inc. analysts' estimates are for informational purposes only. The stock market is subject to various economic, political and market risks, which can lead to unpredictable outcomes. Therefore, all decisions to purchase shares should be made by the investor independently, considering possible risks and his or her financial situation.
Cloud technology deployment is at an all-time high, with 94% of companies worldwide now utilising cloud computing. By 2025, nearly 50% of all data is expected to be stored in the cloud, up from just 30% in 2015.
As the popularity of cloud solutions increases, so does the number of cyberattacks. For instance, the number of cyberattacks has grown at an average annualised rate of 21% since 2016, with 16.73 million attacks reported globally in 2023.
IBM reports that more than 45% of data breaches now occur in the cloud. This increases the need for advanced cloud security measures. For companies across various sectors, securing their cloud operations is critical. This in turn is fuelling the growth of the global cloud security market, which is projected to grow from $40.7 billion in 2023 to $62.9 billion by 2028.
Founded in 2011, CrowdStrike provides an integrated cloud-based cybersecurity platform designated to protect enterprises from a wide range of digital threats. The company's Falcon platform offers 27 different cloud modules that can be deployed by installing a single agent on endpoint devices. Through its subscription-based business model, CrowdStrike's customer base has grown from just over 23,000 to 29,000 in 2023.
CrowdStrike's offerings have gained the trust of some of the world's largest corporations. The company protects 69 Fortune 100 companies, 15 of the 20 largest US banks and six of the 10 largest energy companies.
Its solutions are particularly attractive because they provide scalable protection tailored for today's cloud solutions, offering greater flexibility and efficiency than traditional on-premises security systems.
CrowdStrike's financial performance is as impressive as its technological capabilities. The company's annual subscription revenue grew 30.76% in 2023, from $2.6 billion to $3.4 billion. Its subscription-based model not only provides predictable and recurring revenue but also allows for increased customer spending over time.
CrowdStrike has a net customer retention rate of 120%. This shows that existing customers not only stay with the company but also extend their investment in additional services.
With the global cloud security market projected to grow at a compound annual growth rate of 9.1% through 2028, there are opportunities for further revenue growth. As companies increasingly turn to cloud-based security solutions, CrowdStrike is well-positioned to capitalise on the shift from legacy on-premises systems to more flexible and scalable cloud offerings.
Despite macroeconomic uncertainty, CrowdStrike's stable cash flow and strong operating income provide the foundation for further investment in innovation and market expansion. The company's balance sheet shows total assets of $6.6bn, of which $3.5bn is in cash, allowing it to withstand market fluctuations.
At the same time, the chief analyst of Royal Inc. Ruslan Idyrov reminds us that no investment is without risk. CrowdStrike's ability to maintain its current growth trajectory depends on continued success in expanding its customer base and subscription revenue.
"The company is building its business on a subscription model. Annualised subscription revenue increased by 30.76% from $2.6bn to $3.4bn in 2023. This model provides a stable and predictable revenue stream and drives customer retention by allowing customers to increase spending through additional offers and subscription upgrades,’ the chief analyst opines.
He added that the company's operating expenses remain significant, with 25.2 per cent of its revenue going to research and development, which is necessary to maintain its technological leadership.
"It is also important to consider the fierce competition in cybersecurity. Companies like Palo Alto Networks and IBM are aggressively developing cloud security offerings. While CrowdStrike has established itself as one of the leading players in the market, it needs to continue to innovate to maintain its position in the rapidly evolving cybersecurity market,‘ Idyrov says.
CrowdStrike is currently in a favourable position given the growing importance of cloud computing and the rise in cyber threats. Its strong financial performance, expanding customer base and innovative cloud platform combine to make it an attractive investment for those looking to enter the rapidly evolving cloud security market.
