CrowdStrike caused one of the largest IT disruptions ever. You will never believe what its CEO said is happening to the business now.

On July 19, a flaw in a software update from the cybersecurity specialist CrowdStrike (CRWD 0.55%) caused one of the largest IT outages in history. Around the world, flights were canceled, financial institutions were unable to process transactions, and investors began to panic.

At the time of the outage, CrowdStrike stock was trading near all-time highs. But less than a month later, the stock was already down more than 40%.

I don’t think the investors behaved irrationally. In its filings with the Securities and Exchange Commission (SEC), CrowdStrike’s management says: “If our solutions … are perceived to have defects, errors or vulnerabilities, our brand and reputation would be harmed, which would adversely affect our business . and results of operations.”

Long story short, his software was flawed and caused the outage. Therefore, I think it is very Certainly, CrowdStrike was at increased risk of reputational damage. Realizing this, investors behaved rationally by selling their positions in CrowdStrike stock.

But it could still turn out to be the wrong decision. If what CrowdStrike co-founder and CEO George Kurtz just said is true, then this cybersecurity company has already recovered almost as if nothing had happened.

Is CrowdStrike’s reputation still intact?

On September 17, Kurtz gave a presentation at the Fal.Con conference. And during his presentation, he casually noted, “Our pipeline generation is back to pre-incident levels.” But there is nothing casual about this statement.

For context, CrowdStrike was an absolute powerhouse of a growing company. It grows by attracting new customers to its cybersecurity platform as well as upselling to its customers for one of its many cybersecurity products. With both growth engines running, its top-line growth has been spectacular.

CRWD Revenue (TTM) data by YCharts

The downside to growth of this caliber is that investors have pushed CrowdStrike’s stock to an expensive valuation — it traded at nearly 30 times its sales earlier this year.

The IT outage therefore presented two problems for CrowdStrike shareholders. First, it could have damaged its growth rate as customers switched to another supplier or hesitated to sign new deals. Second, if growth were to slow, then CrowdStrike’s premium valuation would fall, which would also drag the stock down.

However, the CrowdStrike deal appears to have avoided long-term damage to its reputation, according to Kurtz’s terse statement. Consequently, investors can breathe an optimistic sigh of relief.

Business as usual for CrowdStrike?

By around 2030, CrowdStrike wants to generate over $10 billion in annual recurring revenue. For perspective, the company had annual recurring revenue of $3.8 billion starting in the second fiscal quarter of 2025.

CrowdStrike Q2 ended on July 31st. So it was unclear at the time whether the July 19 incident caused any real disruption. But according to Kurtz, the pipeline of potential new deals is full, and the company’s sights remain firmly fixed on its $10 billion goal.

The company is not expected to report financial results again until late November. So investors have to wait patiently for more signals about the health of the business. But according to Kurtz, CrowdStrike has already recovered from the IT outage. And if this is indeed the case, then this is extremely good news for long-term investors.

In terms of what can go wrong with a software business like this, CrowdStrike just went through a very bad scenario. I’ll stop short of calling it a worst-case scenario, as a breach would be worse. But causing a major disruption in a competitive field can ruin a company.

However, CrowdStrike could overcome the setback in short order. If it can bounce back from this, CrowdStrike can likely bounce back from many things in the future. And that’s why Kurtz’s comments about the company’s pipeline are so important to investors.