Cybersecurity firm CrowdStrike experienced a major global computer outage on July 19, causing disruption for retailers, delivery companies, hospitals, and airlines. Despite this, the company is expected to report strong financial results for the second fiscal quarter, with analysts forecasting a 30% increase in earnings from the previous year. Shares of CrowdStrike have rebounded since the outage, although they are still down over 20%.
The outage was caused by a flawed software update uploaded by CrowdStrike into the systems of its customers using Microsoft programs. Delta Air Lines was particularly affected, taking nearly a week to resume normal operations and estimating $500 million in lost revenue and increased expenses. Delta plans to sue CrowdStrike and Microsoft to recover these costs, although both companies have criticized Delta for the extended problems.
CrowdStrike has stated that it has the resources needed to cover any costs resulting from the outage, with $3.7 billion in cash on hand at the end of the previous fiscal quarter and insurance policies to mitigate potential claims. Investors may have more questions than answers after the financial report, as there may be a lag in performance deterioration and potential customer losses as a result of the outage.
Analysts suggest that it can take several months for companies to switch to a rival cybersecurity firm after dropping CrowdStrike, which may impact the company’s ability to sell additional services to existing customers. Moody’s recently upgraded CrowdStrike to an investment grade credit rating but reduced its outlook from positive to neutral following the outage. The company’s growth is likely to be impacted, even if it does not lose many customers.
The challenge for CrowdStrike will be to manage customer relationships and assure them that the outage was a one-time event. The company’s ability to instill confidence in its customers and demonstrate that it has addressed the issues that led to the outage will be key to maintaining its growth trajectory. It remains to be seen how CrowdStrike’s financial performance and customer relationships will be impacted in the long term as a result of the outage and potential lawsuits.
