What Happened: Shares of cybersecurity company CrowdStrike (NASDAQ:CRWD) jumped 5.8% in the morning session as chip and AI stocks surged alongside broader market gains, with the Nasdaq rising by 2.1%, the S&P 500 by 1.5%, and the Dow gaining 0.57% following Nvidia (NASDAQ:NVDA)'s outstanding earnings results. During its Q4'2024 earnings, Nvidia reported impressive topline results (7.6% revenue beat), big gross margin improvement, and EPS outperformance vs. Wall Street's estimates. Notably, revenue grew 265% year-on-year and 22% sequentially during the quarter. The strong topline performance was mostly driven by the data center segment, which was up 409% year-over-year and 27% sequentially as demand for Nvidia processors optimized for generative AI, LLMs (large language models), and other AI workloads continued to accelerate. The company estimated that roughly 40% of Data Center revenue was driven by AI-related applications.
Guidance for the next quarter was also good, with revenue, gross margin, and implied operating profit coming in ahead of expectations.
Overall, Nvidia's strong performance during the quarter highlighted the growing demand for AI-related technology and demonstrated the abundant growth opportunity for innovators within the space.
Is now the time to buy CrowdStrike? Find out by reading the original article on StockStory.
What is the market telling us: CrowdStrike's shares are quite volatile and over the last year have had 15 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was one day ago, when the company dropped 11.8% after cybersecurity stocks fell as industry stalwart, Palo Alto Networks (NASDAQ:PANW) reported fourth-quarter results and lowered full-year guidance for revenue and billings, with both metrics also falling below Wall Street's expectations. This is never a good sign. Furthermore, billings and revenue guidance for next quarter also missed Wall Street's estimates, with EPS below as well. Palo Alto Networks highlighted many challenges during the quarter, including 1.) weakness in the U.S. federal vertical, which impacted billings and revenue growth, and 2) Customers' conservativeness regarding upfront cash payments.
The long-term demand forecast provided was also concerning as management highlighted the possibility of "a period of 12 to 18 months of pressure on our top-line growth rates, notably billings." In addition, the top-line growth metrics are expected to be impacted by the company's shift towards a "platformization" strategy, which will make it easier for customers to consolidate their usage of cybersecurity solutions and provide the possibility of accessing some products for free in the early adoption phase. Under this strategy, Palo Alto Networks noted that a typical customer adopting the platform " will not pay us for our technology for a period of time. As these programs ramp over the next year, we expect a change to our billings and revenue growth for the next 12 to 18 months." This strategy may drive more competition within the cybersecurity space as industry players adjust their pricing/product strategies to stay competitive.
Overall, this was a weaker quarter for Palo Alto Networks, with the poor guidance highlighting several issues within the business as well as potential challenges for cybersecurity players in the coming quarter.
CrowdStrike is up 25.1% since the beginning of the year, and at $308.88 per share it is trading close to its 52-week high of $334.55 from February 2024. Investors who bought $1,000 worth of CrowdStrike's shares at the IPO in June 2019 would now be looking at an investment worth $5,325.