CrowdStrike wins to shed light on fallout from global Windows outage By Reuters

By Jaspreet Singh

(Reuters) – CrowdStrike (NASDAQ: ) results on Wednesday will provide a first look at the financial implications of the global cyber outage that crippled Microsoft’s (NASDAQ: ) Windows operating system last month, with investors eager to understand the impact on the cybersecurity firm’s reputation and whether this has resulted in potential market share losses to rivals.

The July 19 outage was caused by a faulty software update from CrowdStrike, which disrupted internet services globally, leaving thousands stranded at airports after mass flight cancellations and knocking out broadcasters, in while sectors such as banking and healthcare were also heavily affected. .

The incident affected nearly 8.5 million Windows devices, Microsoft said, and sparked several lawsuits against CrowdStrike, including one from Delta Air Lines (NYSE: ).

“We worry that new customer additions will have an impact. “Executives may want to get into the ‘frenzy’ about why CrowdStrike is the right answer and why their choice doesn’t cause a future disruption,” Bernstein analysts said in a note.

The outage may have compromised CrowdStrike’s ability to negotiate with customers on its terms and acquire new deals, giving rivals an opportunity to take market share in the short term.

After the outage customers reassessed their options, Palo Alto Networks (NASDAQ: ) CEO Nikesh Arora said in a post-earnings call last week. Analysts say rivals have increased discounts since the incident to attract customers, gaining market share from CrowdStrike.

More than half of the 45 brokerages that cover the company cut their annual revenue estimates in the wake of the incident, with many expecting CrowdStrike to cut its annual revenue estimate from its current outlook to between $3.98 billion and $4.01 billions of dollars.

The company’s stock has fallen about 20 percent since the blackout, wiping about $20 billion off its market value. Meanwhile, SentinelOne (NYSE: ) and Palo Alto Networks gained 25.4% and 8.3%, respectively.

Still, CrowdStrike stock is up more than 5% for the year, buoyed by the company’s dominant position in an industry where customers are turning to larger vendors that offer end-to-end cybersecurity solutions to cut costs.

The company is expected to report a 31% rise in revenue for the quarter ended in July, according to analysts polled by LSEG.

Some analysts have suggested that the blow from the outage is likely to be short-term, pointing to CrowdStrike’s strong position in the industry and the high costs associated with switching from one large cybersecurity vendor to another.

“Not all customers have felt the pain,” Bernstein said, adding that “replacing CrowdStrike may be an even riskier move and seems unlikely.”

Some analysts also said CrowdStrike’s efforts to help customers bring their systems back online after outages helped its reputation among existing customers.

However, “with competitors like Palo Alto Networks poised to recoup lost business, CrowdStrike must mount a charm offensive to regain trust with partners and customers,” said Gadjo Sevilla, senior technology analyst at Emarketer.

The company is set to attend the summit Microsoft plans to hold in September to improve cybersecurity systems.