There’s a Difference Between Price, Total Cost

CEO George Kurtz said Palo Alto Networks’ strategy of offering free products won’t neutralize CrowdStrike’s advantage around total cost of ownership thanks to superior architecture.

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The Austin, Texas-based endpoint security vendor said customers are smart enough to recognize the different between the price of a product and the total lifetime cost of operating inferior technology. Kurtz emphasized that “free is not free” and “good enough is not enough” when it comes to security and highlighted a recent IDC finding that clients get a $6 return for every dollar invested into CrowdStrike.

“Multi-platform hardware vendors evangelize their stitched together patchwork of point products masquerading as thinly-veiled piecemeal platforms,” Kurtz told investors Tuesday. “What organizations inevitably realize is that vendor lock-in leads to deployment difficulties, skyrocketing costs and subpar cybersecurity.”

Palo Alto Networks announced Feb. 20 it will offer up to six months of free products to customers who switch to its platform, which spans network security, cloud security and security operations. The deal allows organizations to “trade in” products from rival vendors that are still under contract and switch to Palo Alto Networks’ version of the same technology without having to pay for both tools simultaneously (see: CrowdStrike to Buy Israeli Data Defense Vendor Flow Security).

Zscaler CEO Jay Chaudhry fired the first shots at Palo Alto Networks’ platformization strategy last week, saying it will “unravel over time” as the role of firewalls diminishes and demand for zero trust security grows. Similarly, Kurtz said security vendors have tried “bundling, discounting and giving products away for free” for 30 years with limited success given the shelfware and sunk costs that creates for customers.

“ELA [enterprise license agreements] and bundling addiction become the only way to coax customers into purchasing non-integrated point products,” Kurtz said. “It’s the organizations trapped in these fragmented pseudo platforms – riddled with bolt-on point products – that are the only suffering from fatigue.”

Does Fatigue Come From Too Many Tools Or Too Little Integration?

Palo Alto Networks has talked often in recent months about “customer fatigue,” detailing in August that organizations are tired of managing 75 different security tools that often interfere with one another. But Kurtz said customer fatigue really stems from consoles and point products masquerading as platforms. Palo Alto didn’t immediately respond to an Information Security Media Group request for comment.

“Vendor lock-in leads to deployment difficulties, skyrocketing costs and subpar cybersecurity.”


– George Kurtz, CEO, CrowdStrike

Kurtz specifically called out a large, seven-figure deal where a global financial services giant replaced Palo Alto Networks’ Prisma Cloud with CrowdStrike since the former required separate management consoles and separate agents. Falcon’s single platform and integrated cloud security components helped CrowdStrike deliver a 70% time reduction in management and more than $5 million in annual savings.

“The patchwork of multi-product, multi-agent, multi-console, separate platform technologies resulted in visibility gaps, asynchronous alerts, and overall fatigue managing cloud security,” Kurtz said.

CrowdStrike and Palo Alto Networks were recognized in January by Forrester as the two leaders in cloud workload security, with the former leading the way on strategy and the later leading the way on current offering. But Palo Alto Networks had both more cloud workload security market share and more year-over-year sales growth, with the former’s $202.1 million in sales dwarfing CrowdStrike’s $154.3 million.

CrowdStrike’s single platform, single agent architecture allows the company to get data at scale into the company’s platform, leading to lower cost and more efficacy for customers, according to Kurtz. Stitching together acquired products at the agent level is near impossible without extreme diligence, which is why CrowdStrike often takes the better part of 18 months integrating acquired products before selling them.

“This focused, long-term diligent approach to our acquisitions has helped us because we started with a very innovation cloud-native platform from the beginning,” Kurtz said.

CrowdStrike Stock Hits All-Time High After Raising Forecast

CrowdStrike’s revenue of $845.3 million in the quarter ended Jan. 31 edged out Seeking Alpha’s sales estimate of $840 million. Meanwhile, the company’s non-GAAP earnings of $0.95 per share crushed Seeking Alpha’s non-GAAP estimate of $0.82 per share. CrowdStrike achieved GAAP profitability for the fourth time in company history, coming just nine months after crossing the threshold the first time.

For the fiscal year ended Jan. 31, CrowdStrike’s revenue surged to $3.06 billion, up 36.3% from $2.24 billion a year earlier. The company recorded net income of $89.3 million, or $0.37 per share, improved from a net loss of $183.2 million, or $0.79 per diluted share, the year prior.

The company’s stock skyrocketed $70.69 – 23.76% – to $368.25 per share in after-hours trading, which is the highest CrowdStrike’s stock has ever traded since the company went public in June 2019. Earnings were announced after the market closed Tuesday. CrowdStrike also purchased data security posture management startup Flow Security to safeguard information across endpoints and clouds.

For the fiscal quarter ending April 30, CrowdStrike expects non-GAAP net income of $220.4 million to $223.1 million, or $0.89 to $0.90 per share, on revenue of between $902.2 million to $905.8 million. That compares to analyst expectations of earnings of $0.82 per share on revenue on $898.8 million, according to Seeking Alpha.