It's undeniable that artificial intelligence (AI) is changing the technology landscape as we know it. This is evident by the number of AI-related tech companies that are perched among the most valuable companies in the world, as measured by market cap.
Microsoft sits high atop the list and is the only one to boast a market cap that exceeds $3 trillion. It wrested the crown from Apple, which continues to cling to second place with $2.6 trillion. Nvidia, fueled by its gold-standard AI processors, has gained 200% over the past year to take the third spot, worth just over $2 trillion. Alphabet, Amazon, and Meta Platforms -- each with strong ties to AI -- sport market caps of between $1.2 trillion and $1.9 trillion.
With a market cap of less than $73 billion as of this writing, it might seem like heresy to suggest that CrowdStrike (CRWD +3.03%) might have a shot at the $1 trillion club. However, the need to defend against AI-fueled cybersecurity attacks will only increase from here. CrowdStrike's ever-improving algorithms and cloud-native platform provide the foundation for the company's success, which suggests it's only a matter of time before it joins this exclusive fraternity.
Image source: Getty Images.
AI in its DNA
The global average cost of a data breach in 2023 was $4.45 million, according to a report by IBM, and that amount grows with each passing year. With the increasing stakes and the vast potential for business disruption, cybersecurity has become one of the most important considerations for any business. That's where CrowdStrike comes in.
The company's Falcon platform provides the industry's most sophisticated threat protection, leveraging advanced AI and machine learning to stop threats within seconds while also preventing future attacks. The system is trained on more than 2 trillion threat events per day, and its AI-powered system improves with each encounter. CrowdStrike has expanded beyond its endpoint security roots, providing a growing suite of products, including cloud security, identity security, security information and event management, threat intel, data protection, and exposure management services.
The proof is in the pudding, or so the saying goes. For its fiscal 2024 fourth quarter (ended Jan. 31), CrowdStrike's revenue jumped 33% year over year to $637 million, and its diluted earnings per share grew 102%, thanks to its expanding operating margin. At the same time, the company's annual recurring revenue increased 34% to $3.44 billion. Furthermore, customers are adopting a greater number of modules, as those with five, six, or seven modules increased 64%, 43% and 27%, respectively. Deals signed with eight or more modules more than doubled.
Management expects the company's robust growth to continue, guiding for fiscal 2025 revenue of $3.96 billion at the midpoint of its guidance, representing growth of about 29%. It's worth noting that CrowdStrike has historically provided conservative guidance, so its actual results could conceivably be higher.
The combination of the growing cybersecurity market and CrowdStrike's increasing suite of security services is pushing the company's market opportunity higher. Management estimates the company's total addressable market (TAM) at $100 billion, growing to $225 billion by 2028.
NASDAQ: CRWD
Key Data Points
The path to $1 trillion
CrowdStrike is one of the most talked-about names in cybersecurity for its expanding suite of security solutions dating back more than a decade.
In 2023, CrowdStrike was named a leader in Gartner's 2023 Magic Quadrant for endpoint protection -- for the fourth consecutive time -- cited highest for its completeness of vision and ability to execute. CrowdStrike was also named a leader in cloud workload security according to the Forrester Wave Report for Q1 2024, which ranked CrowdStrike highest among all vendors in strategy and received the highest possible scores for vision and innovation. Despite its long and growing list of industry accolades, the company will need to continue to execute, and joining the ranks of trillionaires will take time.
In fiscal 2024 (ended Jan. 31) CrowdStrike generated revenue of $3.06 billion, giving it a price-to-sales (P/S) ratio of roughly 24. Assuming its P/S remains constant, CrowdStrike would have to increase its revenue to about $42 billion annually to support a $1 trillion market cap. For context, Wall Street is forecasting revenue of $3.97 billion for fiscal 2025 and $5.03 billion in fiscal 2026, so revenue of that magnitude is still a way off.
If the company were able to maintain its 33% year-over-year growth rate, CrowdStrike could reach the $1 trillion market cap threshold by 2033. However, maintaining that level of growth for a decade would be a tall order. If we decrease its average revenue growth rate to a more modest 27%, CrowdStrike could potentially reach a $1 trillion market cap by 2035.
There's reason to believe that the need for strong cybersecurity solutions will continue. The damage from cyberattacks is expected to hit $10.5 trillion by 2025, a 300% increase over the past decade, according to data compiled by McKinsey & Company. The total addressable market for security solutions is expected to surge to between $1.5 trillion and $2 trillion, or roughly 10 times the current market size, over the next 20 years or so.
If CrowdStrike can capture just a small part of that growing market opportunity, it could soon join the $1 trillion club.
