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Jeff’s Random Words

This past week featured two of the most anticipated earnings reports of the season. Nvidia (NVDA) earnings were certainly the headlining act (there was even a watch party in NYC?) and on the same afternoon, CrowdStrike (CRWD) reported. 

In most quarters, it wouldn’t be worth mentioning CrowdStrike in the same sentence as Nvidia, but after the July 19 incident where a faulty CrowdStrike software update crashed millions of computers all over the world, the investing community certainly wanted to hear what CEO George Kurtz had to say.

I made sure to listen to the earnings call, rather than just read the transcript. I wanted to hear the tone management took both with their prepared remarks and the Q&A with analysts. If I had to sum up the earnings call in one word, that word would be confidence. Kurtz did start with an apology, but that quickly pivoted to what the company did right in the hours after the incident and how much demand they continue to see from current and prospective customers.

This is where I struggle. It’s management’s job to spin things to be positive and I understand that. So while I was listening, I was constantly trying to balance the cynic and the optimist voices in my head (not to be confused with the other voices, which is a topic for another newsletter). 

There’s a world in which everything they say is true. This was a mistake, but the level of trust the company has garnered with its customers led to an outcome way less terrible than many feared. But there’s another world where the angst and uncertainty are stronger than they’re leading on. Only time can truly answer this question.

Taking the results at face value, it really does look to be ok. The company expects a $60 million hit from deals that are delayed and discounts given to make customers happy. While $60 million is a lot of money, even with the lowered full-year guidance, the FY 2025 expected results are strong. They’re just less strong than they were before July 19. 

So what are we (as current or prospective shareholders) to do? The honest answer is that you need to decide that for yourself. The degree to which anyone decides to buy, sell, or hold CrowdStrike stock has to be based on their belief in the company generally and in how management is portraying the impact of the July 19 outages. 

I think it’s reasonable to buy here, cautiously, and add more over time as results in future quarters provide more insight into the potential customer pipeline and current customer spending. I also think it's reasonable to wait and see. And for those who like to live a stress and drama-free investing life, selling or ignoring is also a possibility.

I bought a little in early August, which has turned out well so far. But it was a small amount because I had a small amount of conviction that things would be ok in the long term (remember that I hope to hold my CrowdStrike stock for decades). This week’s report has not diminished my conviction at all and may have strengthened it. But I could still be wrong, and I am investing accordingly.

Jeff