Technology
CrowdStrike defies IT outage and remains in the race despite billion-dollar stock losses
Despite one of the largest IT outages in history and an associated market value loss of nearly 20 billion USD, the cybersecurity firm CrowdStrike remains competitive.
CrowdStrike, the American cybersecurity company, faced one of the most severe IT outages in history on July 19. Despite the massive impact on the systems of numerous companies, including Delta Air Lines reporting losses of $500 million, CrowdStrike estimates the impact on its own annual revenue to be only $100 million. This corresponds to a decline of about 2.5 percent compared to the previous forecast.
The market nevertheless reacted skeptically: CrowdStrike's market value fell by nearly 20 billion USD since the outage, costing the company far more than the projected revenue losses. Analysts suspect that this strong reaction is partly due to legal risks as lawsuits could be imminent. CrowdStrike, however, emphasized that customer contracts contain liability limitations and the company has insurance policies in place to minimize financial losses.
Meanwhile, the stocks of competitors Palo Alto Networks and SentinelOne increased by 10 to 20 percent, suggesting that the market views their competitive position relative to CrowdStrike as strengthened. However, some experts consider this assessment to be overly pessimistic. CrowdStrike's existing customer base is considered stable, as the removal and replacement of cybersecurity modules are complex and costly.
A potential risk could be that the event impairs CrowdStrike's ability to attract new customers. Despite the outage, the company's main selling point—the ability to detect and prevent cyber risks—remains unchallenged. CrowdStrike's products are still considered market-leading, and the strategy of offering multiple services through one platform is showing success: Almost half of the customers spend more than $100,000 and use eight or more of the offered modules.
CrowdStrike's crisis communication was positively received by the cybersecurity community, which is noteworthy given the incident. This could be crucial for maintaining trust in the company.
However, the risk remains that the outage could delay ongoing contract negotiations and that new as well as existing customers might negotiate better terms. Nevertheless, the example of CrowdStrike shows that even serious mistakes do not necessarily lead to lasting damage.
