CrowdStrike Stock Soared 20% in August. Here’s Why the Gains Could Continue In September.

July 19 was a fateful day for CrowdStrike (CRWD -3.85%) investors. The company released a routine update to its cybersecurity software which had a malfunction, and it sent around 8.5 million Windows-based computers crashing. The outage cost CrowdStrike’s largest customers — from airlines to banks — an estimated $5.4 billion.

By Aug. 2, CrowdStrike stock had crashed 36% to a low of $218 as investors feared the incident would lead to a customer exodus and a substantial decline in the company’s revenue. But the stock bounced back in August with a 20% gain for the month overall, because the fallout appears to be less damaging than originally anticipated.

That was reinforced by CrowdStrike’s Aug. 28 earnings release for its fiscal 2025 second quarter (ended July 31), when CEO George Kurtz told investors that many upcoming customer contracts would likely be delayed rather than canceled. Therefore, here’s why CrowdStrike stock could continue to climb in September (and potentially beyond).

CrowdStrike is still a cybersecurity leader

The cybersecurity industry has a history of fragmentation, meaning different vendors specialized in different product segments. That left businesses to piece their cybersecurity stack together from multiple providers. The CrowdStrike Falcon platform, however, is unique because it’s capable of fulfilling all of the cybersecurity needs within an organization.

Artificial intelligence (AI) has been at the heart of Falcon for more than a decade, facilitating automation across the platform. That is critical because cyber attacks are growing in both sophistication and frequency, and human managers simply can’t keep up with the sheer volume of alerts.

CrowdStrike’s AI models are trained on more than 2 trillion security events every single day, and they make 180 million indicator-of-attack decisions every second to determine the intention of a potential threat. In other words, the company’s AI models are constantly improving to become faster and more accurate at identifying and responding to incidents.

Plus, CrowdStrike launched Charlotte AI last year, which is a virtual assistant embedded within Falcon. It can be prompted to instantly hunt for threats, and it reduces the need for employees to manually investigate every security alert. CrowdStrike says customers are saving an average of two hours per day thanks to Charlotte AI, because it adds another layer of automation to Falcon.

Falcon features 28 modules across cloud security, identity protection, endpoint security, and more. During Q2, CrowdStrike said 65% of its customers were using at least five modules. Additionally, the number of deals signed for eight or more modules (which is where spending really ramps up) soared 66% year over year, which highlights the growing need for cybersecurity particularly among larger, more complex organizations.

CrowdStrike’s Q2 revenue topped expectations

CrowdStrike generated $963.9 million in revenue during Q2, which was a 32% increase from the year-ago period. It was also above the high end of management’s forecast ($961.2 million), suggesting there wasn’t much financial impact from the outage during the quarter.

Perhaps that isn’t surprising because the outage happened with less than two weeks remaining in the quarter. However, management’s outlook for the fiscal 2025 full year (ending Jan. 31, 2025) also points to a relatively muted impact. The team originally expected to generate $4 billion in revenue for the year, which it revised down by just 2.5% to $3.9 billion. That result would still represent 27.5% revenue growth from fiscal 2024 which, all things considered, is good news for investors.

As I touched on at the top, the company’s CEO said some of the deals that should have closed at the end of Q2 have been pushed into future quarters, but the “vast majority” of them remain in the pipeline. In other words, it seems potential customers have taken a pause to make sure CrowdStrike’s issues are resolved before putting pen to paper, but few intend to walk away completely.

Looking to the long term, despite the recent issues, the company actually reiterated its goal to reach $10 billion in annual recurring revenue (ARR) by fiscal 2031. It had $3.86 billion in ARR at the end of Q2, so that target would represent a whopping 159% growth over the next six years.

CrowdStrike stock is still expensive, but less so than before

CrowdStrike generated $47 million in net income during Q2, which was a staggering 455% increase from the year-ago period. But the company was breaking even just one year ago, so it’s still relatively early in its profitability journey. That means it’s more appropriate (for now) to value it using the price to sales (P/S) ratio, which focuses on revenue instead.

Based on CrowdStrike’s trailing 12-month revenue of $3.5 billion and the company’s market capitalization of $67.5 billion, its stock trades at a P/S ratio of around 19. That’s down significantly from July when it was hovering near 30, but it’s still expensive relative to its main rival, Palo Alto Networkswhich trades at a P/S ratio of 15.9:

CRWD PS Ratio data by YCharts

CrowdStrike deserves a premium P/S ratio in this case its revenue grew by 32% in the recent quarter, whereas Palo Alto’s revenue rose by just 12%. However, if there is any unexpected fallout from the July 19 incident which forces management to reduce its fiscal 2025 revenue guidance even further, investors might reconsider the valuation they are willing to pay for CrowdStrike stock.

With that said, based on the facts available today, I think the stock can build on its 20% gain from August and continue its recovery in September. If a 2.5% decline in the fiscal 2025 revenue forecast is as bad as this situation gets, there is every chance CrowdStrike stock heads back to its all-time high of $390 over the next year or so. Further upside could be in the cards for the future as the company inches closer to its $10 billion ARR target.