A dated test, four days out

CrowdStrike, which sells endpoint, identity and cloud-workload protection as subscriptions through its Falcon platform, reports quarterly results after the close on Wednesday, 26 August. It is the only one of the three largest listed security-software companies with numbers due this week. Palo Alto Networks follows on 1 September; Cloudflare last reported on 6 August.

The business heading into that print is speeding up, which is rare at this size. April-quarter revenue was $1.386bn, up 25.6% — a third consecutive quarter of faster growth, from 21.3% four quarters earlier. Gross margin widened 150 basis points to 75.3%, so gross profit grew 28.1%, ahead of sales. Annual recurring revenue (ARR) ended at $5.51bn, up 24%, with a record first-quarter addition of $255.8m in net new ARR, up 32%. Free cash flow reached $468m, and management raised full-year net new ARR growth guidance by 520 basis points at the midpoint.

The price history was misleading

Anyone scanning CrowdStrike's summer chart saw what looked like a wipeout: about $701 in late June, roughly $186 days later. That was a four-for-one stock split, approved on 3 June and effective 2 July. Adjusted, the shares are up about 98% since 20 February and 61% since early May. CrowdStrike participated fully in the security advance; only the unadjusted series suggests otherwise.

Where the re-rating outran the earnings

All three are loss-making under generally accepted accounting principles (GAAP), so price against gross profit is the lens that survives the comparison. Measured that way, since 22 May Palo Alto went from 27.8 to 38.2 times trailing gross profit — a 37% increase on gross profit that did not change at all, because it has reported nothing since April. Cloudflare went from 44.9 to 57.0 times, up 27%, while its gross-profit dollars grew 6.8%. CrowdStrike went from 47.0 to 51.1 times, up 9%, on gross-profit dollars up 6.4%. One of the three re-rated roughly in line with what it earned.

Cloudflare, which routes and filters traffic for websites from its own global network, has the loudest demand story: revenue up 35.9% to $696.1m, the fastest in two years, dollar-based net retention of 120%, and 4,698 customers spending over $100,000 a year, up 27%. But cost of revenue grew 52.7% as network capacity landed in cost of goods, pulling GAAP gross margin to 71.8% from 74.9%. Management says more than half the traffic on its network is now AI agents rather than people. None of that appears as a disclosed product revenue line; the crawler tolls and payment gateways are announced, not itemized.

Palo Alto, the firewall vendor now bundling security subscriptions around its hardware, reported next-generation security ARR of $8.1bn, up 60% — but $1.6bn of that arrived with CyberArk and Chronosphere. Gross margin fell to 67.6% from 72.9%, and the quarter carried a GAAP operating loss of $183m.

The bond market ended the run, not the customers

All seven of the big security names peaked in the same session, 13 August. Then the 30-year Treasury yield printed above 5.33%, its highest in 19 years, on 18–19 August. Cloudflare fell 15.7% into the 20 August trough and CrowdStrike 15.6%, against 8.9% at Fortinet and 7.0% at Zscaler. The losses sorted by multiple, not by security demand. The partial bounce on 21 August followed the Treasury Department saying it would at least double its debt-buyback size.

What has to print

Sell-side previews put the bar for Wednesday at roughly $292m of net new ARR, more than 3% above CrowdStrike's own guidance. The durable part of the case is consolidation: gross retention near 97%, with endpoint, identity, cloud workload and security-analytics modules sold onto one agent, which is how CrowdStrike takes budget from single-product vendors. The durable threat is Microsoft, which bundles competing security into licences enterprises already buy. Consensus already assumes revenue growth of 23.7% this fiscal year — the acceleration is in the price before it is in the release.

The setup

Where it stands — CrowdStrike's growth and margins improved into a print due 26 August, on a multiple that rose less than its peers' since May.

Would confirm — Net new ARR above $292m with gross margin holding at or above 75%.

Would invalidate — Net new ARR below the roughly $255m added a year ago, or a sequential gross-margin decline.

Watch next — Fiscal second-quarter results after the close on 26 August; Palo Alto's fiscal fourth quarter on 1 September.

Valuation — 51.1x trailing gross profit and 43.8x forward, against 47.0x in late May; 38.4x trailing sales.