Like I mentioned at the top of the show last night, every major bear thesis in tech was upended. I'm not just talking about NVIDIA and Salesforce. Look at CrowdStrike. Last night, the cybersecurity kingpin reported what they called the best quarter in the company's history, sending the stock up more than 20% today. This was a terrific top- and bottom-line beat, with management also raising their full-year forecast for net new annual recurring revenue growth, taking it from 27.7% all the way up to 34.34%. Now, that is a huge and important metric, and it's a staggering number bump. Only a few months ago, everyone was worried that cybersecurity would get crushed by AI competition. Turns out the rise of AI has only made CrowdStrike more essential because the attackers have this technology, too. They've become the security platform underneath the AI economy, and it's making them a fortune. Do not take it from me. Let's check in with George Kurtz. He's the co-founder and CEO of CrowdStrike to learn more. Mr. Kurtz, congratulations and welcome back to Mad Money.
Well, Jim, great to be here and thank you.
Of course. Now, George, I've got to tell you, you taught me early on, we want to look at these annual recurring revenue numbers because that's when you find out the true health of a company in your industry. These numbers were spectacular. What's driving it?
Well, when you think about the numbers and the quarter we delivered, it really was a quarter of records. Our revenue, almost 1.5 billion; annual recurring revenue, net new, 333 million, up 51% year-over-year; operating income 372 million, which was up 46%; and record free cash flow of 377 million or 26% of revenue. So up and down, we saw just tremendous success. And what's driving that is really what I call the Mythos moment. That is the realization that the AI adversary is here. They're moving at inference speed, and companies need the technologies that CrowdStrike created to help stop the breach. And that's what's driving the momentum not only in this quarter, but sustainable tailwinds into the future.
George, a lot of people I deal with have said to me, "You know what? Nothing can stop the agents now. They're out of the sandbox. We should be terrorized." I always say the same thing: "Have you read any of the things that George Kurtz puts out?" They actually can be stopped, but you have to have modern technology, and the other stuff—even stuff that's a couple years old—may not work. You have a solution, correct?
We have a solution, Jim, and it's called the Falcon platform. And we've built this from the ground up to be able to adapt and take advantage of this AI era, right? It's the speed at which the adversary is moving. It's the complexity of the attacks. And the platform was built day one when I started this company to accommodate this. Now we see more attacks. We see these attacks faster, but you need the right AI, the defensive AI to fight the offensive AI. And that's what we've built at CrowdStrike. And that's why not only do we stop breaches, Jim, but we cure the complexity that it drives with a patchwork of products. And this is one of the reasons why CrowdStrike is the security operating system for the agentic era.
George, what percentage of companies are protected well enough, do you think?
I think most companies—it depends on the industry—but most companies have some level of gaps. And the challenge that you have, even if companies are sophisticated and spending a lot of money, the threat landscape is moving so quickly. We saw these escapes from the sandbox that we talked about, and luckily this was an agent just trying to pass a test. They weren't actually trying to do anything evil, and we saw what happened. So if we think about the AI era and how fast these AI agents are able to swarm and find vulnerabilities and exploit those, it's just a different quantum of security that's needed. And this is why we think we're in pole position.
Well, I have to tell you, one of the things that concerned me—but first, congratulations on this—but you had an eight-figure Flex deal with a frontier AI lab. I mean, I would have thought that maybe they knew how to do this themselves. One of them sure did seem to think that they do. I guess they can't. They're not in this business, so they may need you.
Well, I think, Jim, what we've seen is that we partner very well with the frontier labs, and a lot of that has been driven by customer demand. Customers trust CrowdStrike. We've built incredible credibility over the last 15-plus years. We work and understand security day in and day out. And again, customers want choice. We certainly leverage the frontier models, but at the end of the day, it's very difficult to replicate what CrowdStrike does. And this is one of the reasons why customers choose us. We're cutting down complexity, we're reducing costs, and we're getting the outcome of stopping breaches.
Reducing costs. I know that's important because people can never figure out what the ROI is of what you do, except for until their operations are wiped out.
Well, I'll tell you, Jim, we spend a lot of time actually working with customers in demonstrating the ROI. We call it proof of value, and we actually go through and talk about how many different point products we can consolidate. And routinely we are consolidating, meaning we're removing two, three, four, five, and six products from an environment to reduce the complexity and the overall cost. But we get a much greater share of the wallet, which is why you've seen our Flex numbers, which is our innovative licensing model, reach record almost $2.3 billion.
