CrowdStrike Holdings, Inc. (CRWD) September 10, 2026 Conference Transcript

I'll give folks a couple of minutes here to settle in, but good afternoon to everyone joining us here and, you know, folks joining and tuning in on the webcast. My name is Fatima Bulani. I jointly head up our software equity research franchise here at Citi. And I am so privileged and delighted to be able to put a capstone on Citi's TMT conference on day three with a keynote session with the CFO of CrowdStrike, Bert Podbear. Thank you so much for being here.

Fatima, always a pleasure. Thanks for having us.

Bert, I want to start our conversation off with a statement. it has never been a more exciting or important or consequential time to be a cybersecurity company. And so with that in mind, you know, to set the tone of our discussion and our dialogue, can you give us a State of the Union on the business, on the financials, on the overall strategy, and specifically the key messages that you want to really hammer home post your second fiscal quarter results and on the back of your annual user and partner conference, Falcon, last week.

Yeah, thanks. Hi, everybody. Great to be here. And I love talking about the Mythos moment, right? So the Mythos moment happened back in April, and there was a lot of activity around that, a lot of kind of things that came out of that. You had good stuff, not such good stuff. But for us, it was a defining moment with respect to, hey, conversations are happening faster than they ever have happened before, and then they turned it into ARR for Q2. So Q2 results were sensational, Fatima. You know, it was our best quarter in company history, whether it was net new ARR, non-gap profitability, we had a record Q2 free cash flow quarter. so the numbers backed up the comments that the mythos moment for us was real and it was more than just conversations but it was ARR. Then you kind of went into you know products we had great product growth you know across the board next gen sim cloud next gen identity you had AIDR which was great you had exposure man on and on and on flex which is our go-to-market license which is most elegant license i think not only security but software has ever seen um did really really well uh you know it was one of those moments where you're getting data and you're saying wow this data is super impressive with flex um the top 10 deals of the quarter by deal value were all flex deals not non-flex deals so we were excited about that and then you mentioned falcon falcon was uh you know us coming out and saying hey we can be super innovative as well we don't have to be a startup and we came out with some stuff whether it was safe minds or um you know guardian whatever it was it was really really well received and then of course i have to add my two cents and i pulled in you know some long-term targets 10 billion and 20 billion i pulled those in so i think all that combined kind of led for a really, really good Falcon. So that's kind of the state of the union, and hopefully that resonates with everybody here.

Bert, Falcon was clearly eventful from a product announcement in a financial and target model expectations update, but we'll come back to that because there's a lot of layers of those onions to peel. But Falcon, last week, week, record-breaking attendance for you. It is your biggest pipeline generator for the business. But interestingly, this year, the timing of the event clearly transpired and potentially even benefited from this post-Methos moment and the hugging face incidents that we continue to hear about in the headlines and the news. So I want to ask you, Bert, You see and speak to a lot of customers at these events. What was clear? What was the most distinct thread in your chief information security officer and buyer conversations this year at Falcon versus years prior?

Yeah, well, certainly it was about, you know, protecting, you know, the agents, you know, protecting these AI agents. And, you know, customers were, you know, after three things, really. they said look with these agents that are coming out we need visibility we need control we need to control what and when these agents go out we need come you know guardrails around this we need uh we need uh we need uh audit it's got to be auditable all this stuff that's going out we need to understand what you know what's going on what the reporting we're getting questions from regulators etc etc and i'll throw in a fourth cost we need to be able to control the cost of this stuff so those are the four things that you know the the folks in security were talking to us about and by the way they were talking to us about it before uh the conference right um we have uh you know we have off sites uh with the management team about 50 of us go somewhere and we kind of to figure out what we're going to do for the next 10 years. But on this particular offsite, which happened just after Mythos, we had a CEO from a Fortune 50. And they were on a screen like this. There are 50 of us there, like this room here, but smaller. 50 of us, and he was on the Zoom. And you saw the panic in his eyes. He's like, my CEO wants AI deployed everywhere. And I'm scared to death that we're to be putting out these agents and we're not only going to be opening the back door we're going to be opening the front door for the adversaries help us and so we went through what i just went through all of you folks in terms of what he was looking for and then we worked collaboratively with him and his team to put out you know guardian and we couldn't be more pleased so the cios and cisos that was the main theme that they were kind of focused on help us which is very different from the past where you know we're prospecting we're going out to look for customers customers are coming to us prospects are coming to us we have a real need and we think you can help us so please

pick up the phone and let's talk and we did more of that than almost anything else we've ever done Bert, one of the lines of conversations and consistent conversations and debate, frankly, that I've interfaced with investors on is this notion of, well, the environment, the cyber attack landscape has never been more pernicious. It has never been so as demanding. It has never been as sophisticated, you know, ever, even in prior computing cycles. And so the question and the debate is, well, in the post-methos moment and these hugging face in the headlines, you know, why aren't we necessarily seeing, you know, massive budgetary explosion? Now, certainly we saw some of the tinges of that in your second fiscal quarter, but how would you allay concerns or sort of emphasize to investors that maybe the mythos moment isn't a moment, It's actually an era of sustainably and durably capturing more growth in budget. So really the pain point is why didn't we see a budgetary explosion immediately after these events like we maybe saw in the past?

Yeah, it's a great question, Fatima. So first of all, I'm driving to your conference and I'm listening to the radio and there's some guy, you know, talking about AI doom. And I'm kind of like listening to this going, okay, well, you know, he's not all wrong. But then there are companies like us who can help stop and prevent the doom. And so what does that all mean? You know, you think about the landscape and the threat landscape. Look, years ago, the number one threat actor were these nation-state attacks. They would hire a thousand people, they'd put them in a bunker, 65 feet below the ground, and they'd come up with all these sophisticated ways to, you know, disrupt companies, attack companies change election results all this kind of stuff and today it's it's now in somebody's living room right these attacks can be generated in somebody's living room with all these agents that are as sophisticated as anybody that we've ever had seen before and so we're in this really kind of strange period where you know people are figuring out how to use these things mostly for good but some for bad and for the bad what's really happened is you You know, number one, it's not just the volume of attacks that have gone through the roof. Speed. The speed of these attacks has never been faster. You know, you've seen the sophistication. It's never been more creative in terms of how to attack somebody and steal their prize possessions. So you're seeing all that combined, and the threat landscape has just exploded in terms of the surface of attack. and you need companies like us to help kind of plug the dam so fortunately for us we feel that you know sometimes it's better to be lucky than good we've talked a little bit about that and what do I mean by that is that AI is consumed at the end point and last I checked we really know how to run an endpoint business and so it really came to us and the great news is we're prepared we're prepared we launched a battle-tested you know product called Guardian that actually prevents the breach on these agents that people are building you know faster than you know you can drink your coffee it's it's it's it's incredible what we're seeing in this basically look I actually think that we are in the greatest transformation of technology the world has ever seen so I've been in security a long time I've been in software you know a long time I've never seen anything like this. The consumption of AI is through the roof, and we just happen to be in the right position to help secure the AI.

MS. Bert, you alluded to this in talking about some of the highlights from Falcon, but some of the things that stood out to us certainly was there was a pretty curated slate of very high-impact SKU expansions and product introductions. So the velocity of the innovation was clear, but specifically with the launch of AI Guardian and SafeMind, those two specifically come to mind. Can you give us and maybe help us with some parameters as to which one of the newest product introductions you expect to have most salient impact on your financial performance and your financial momentum near-term? and asking this going back to hey the budgetary consciousness has never been on as high alert right so where would those killer products be where you're you know commandeering the budget yeah so you know obviously we haven't released safe minds yet so it's early days so nothing really contemplated in the financials for this fiscal year we contemplated it next year you know but

It's still early days. We still launched it. I think Guardian, as far as the AIDR category, I think that's gonna have some legs. On that one, I would say the following. I think that AIDR as a category will be bigger than EDR. So let me repeat that. AIDR as a category will be bigger than EDR. That's our view. And that just tells you what's out in front of us. In terms of near-term, I mean, have your pick. you know, you've got, you know, next-gen SIM, next-gen, you know, identity, you've got cloud, you've got exposure management, you know, on and on and on. These products are doing really, really well, right? Last quarter was our best quarter in company history. You know, we did $333 million net new ARR, 51% growth year over year. I mean, these are big numbers. And I gave, you know, increased guidance, and we'll talk about that, I'm sure, all because of the momentum than we're seeing you know you talked about in your earlier question about why aren't we seeing it you know why aren't we seeing this uptick from the mythos moment more than you know what we're seeing and I come back and I go well for us it was pretty good I'm not so sure others are benefiting the way we are because we're here at the right moment it goes back to being an endpoint company right the AI is consumed at the endpoint you're gonna hear a lot of other folks talk about well you know it's it's all about workflow or it's all about network or it's all about this that and the other thing no do your homework your reading AI is consumed at the end point we see we see network traffic before it

even goes to the network before it's encrypted so you know when you think about that it's hard to refute the comments that I'm making and for us we're proving it with the numbers you know word you know words are cheap talk is cheap show me the scoreboard and so you know I did we did that last quarter for sure and certainly in some of the guidance that I gave Bert and just drawing from your past experience in having been a pretty a critical vendor in securing prior computing cycles you know I think a helpful frame of reference that you've provided is, you know, let's think about the monetizable opportunity for you for AI security from the standpoint of, hey, if we're going to be spending a trillion dollars of CapEx and generating $3 trillion of demand on all this AI infrastructure, well, there's going to be some proportion of that that's going to have security wrapped around it, right? So I think your framing has been for every dollar of AI demand, there's going to be three to four cents maybe of cybersecurity spend. Can you walk us through kind of some of the foundational underpinnings of your thought process there? You know, what sort of led you to this being, you know, an appropriate mental model for folks to think about in terms of the incrementality of market opportunity for you?

Yeah, let's start with the budgets. look if a company is breached they're gonna find a money let's start there so now companies are really getting worried and boards are getting really worried about their companies in terms of how do we prevent from getting breached and they're looking and they're coming to us we're getting calls from folks that you all would know in this room CEOs of very prominent companies that are calling us directly and saying what do we need to be worried about and how can you help protect us. This is not the CIO. This is not the CISO. This is the CEO of Fortune 500 companies calling us and asking us for help. Board members from these companies calling us and saying, what do we need to be thinking about as board members? We want to make sure we're doing the diligent things. So the budgets, you know, they're going to come from net new, but they're also going to be coming from other areas. You know, as AI becomes more prolific within organizations and organizations are going to become more efficient and effective of what they do, dollars are going free up and we're already seeing it so we think that we're in a great spot to capture more of those dollars and become more of a you know strategic partner for these firms and they're looking to us for for help and by the way we do pick up the phone we are one of those companies that picks up the phone you know answers calls that from the management team all the way down as part of our culture right when you know when things are good and when things are not so good we're there we're there for our customers we're when we say we're customer focused we are customer focused look we got a ceo he's across the the bridge over there he comes from jersey you know this guy doesn't stop right he's still a founder so think about that still a founder most of our competitors are not founders and there is a difference uh this guy wrote the the the the most selling cyber you know book in in in the world history called hacking exposed this guy built a cyber security company for cyber security professionals that's what he did and because he's a founder there's no rest there's no rest for those who kind of work with him day to day george doesn't have an off button right here there's no off button you know there's just it's just go and the great news is he's a really good human being this guy is has a great reputation he's tough as nails and to work for him is brutal right it's kind of like he is on that means you are on I'm coming to my 11th year and next week and I reflect back and I said man keeping up with that guy was you know real real challenge for me in my career and I've never been happier never been and I've never learned more, and I went on stage for our sales kickoff at about, I don't know, 3,000, 4,000 sales folks, and I said two things. I said a bunch of stuff, but I said two things that they needed to remember. One, don't make deals with customers that are on the side, because we'll find out about it, and you're sacked. There's no room for it. And number two is, never bet against George. That's a real bad bet, right? That guy just keeps going. the innovation that you've seen at Falcon you know the go-to-market engine that he's built the you know taking out friction you know through our flex offering we'll talk about that I'm sure and you know the you know the way that he kind of gets the most out of his team right it's it's it's it's it's focused there's never I've never met a more purposeful man in my life and it It shows, again, in the scoreboard. It shows in the numbers.

In talking about George, I have to hearken back to July 2024. That was a very pivotal moment for you as a company. The business financially and strategically is in a dramatically different place since July 2024 when you did have the outage that was heard around the world and felt around the world. So, Bert, what I want to ask you, between you and George, what have been some of the factors in navigating through this period where you're absolutely now in the free and clear, what has surprised you the most, and how has that experience influenced the way you've managed the business, managed operations, and frankly, stored capital?

Yeah, I mean, that was an event. I never want to go through it again, but there were some silver linings, right? Our touch points with customers were through the roof. We talked to almost all of our customers. Sometimes it was groups of 1,000, whatever it was. We were on the phone, all of us. We were in a room, I don't know, about 450 people, and on the board, the whiteboard, it had Bert that took all the companies that thought we were going to go broke, so I had to go through our financials. You had the bigger companies that George took. Mike Santonis, our president, he took more of the technical challenges on and on and on down the line, 50 of us. and we all had companies that were associated with our name or events that we had to go to. So silver lining there is just more touch points with our customers. The biggest, you know, I guess surprise was this, from that point on until now, is the speed of AI adoption. It's incredible. We've never seen anything like this in our lifetimes, and maybe we never will again. And so the speed of, you know, AI adoption needs security, right? Somebody asked me the other day, I said, well, who runs Sidecar with the AI providers, the frontier models, to make sure, you know, that it gets out and used, you know, accordingly? I said, well, you know, you're going to have these folks over here saying they need that, and these folks over here saying they need this. At the end of the day, they need security. You know, just to my former example with the CIO talking about, hey, I can't deploy without you guys. So, you know, with that in mind, it's, you know, we're partners to all these folks, right? We're enablers for AI adoption. So we used to talk about security following the technology Now we're talking about security following the AI adoption curve, which is much steeper than the technology curve. So it's been really good for us. You saw it in the numbers. You saw it in the guide. And you're seeing it in the business. You're probably hearing it in my voice. I've never been more excited to be at the company 11 years in terms of what's in front of us.

Bert, flex and the flex motion was given birth. The concept and the procurement vehicle sort of came into being after the event. And so at nearly 40% of the ARR mix today, you're just two years in. Can you give us some perspectives and shed light on the design and contours of some of these commercial engagements, the adoption and the economic impact? I know you sort of peppered in some stats earlier and then you know ultimately what have you learned and changed in the flex Process programming in the two years since introduction Yeah, so for those that aren't familiar with flex It's the most elegant go-to-market.

I think that's ever been invented, you know, and I wish I could take credit for it It was the customers coming to us and saying hey you now have you know 25, you know modules you have 26. How do we get access to all of it? So we kind of worked through, you know, with our customers what would make the most sense And we wanted to make it really easy. I mean, as I said earlier, George is from, you know, Jersey. He's just, how do we make this so easy for customers to purchase? So we came up with this license where basically, you know, you negotiate once, and then you've got a deal for a period of time. And then you're able to add more. but not renegotiate terms. It's already done. It's just adding another PO to an existing contract where, you know, the blocker is me, the CFO. But if the business unit owner goes to the CFO and says, hey, I need more for CrowdStrike, but I'm going to give you back X for something else, and the X is going to be more than what we're asking for for CrowdStrike, well, you don't need to be a CFO to do the math to say okay let's go do that in the in the entire you know life of software and security for sure you know one really was able to kind of grab onto a license where you have three winners at the same time you have the economic buyer you have the vendor you know us and procurement I've never seen all three of those win at the same time so the The economic buyer wins because they're able to consolidate, get the best outcomes at a cheaper cost. We win because we're locking in our customers for longer, bigger contracts and being bigger supporters and bigger advocates and trusted advisors. And procurement wins because they're after the biggest discount. The biggest discounts are our flex contracts. They get paid based on additional discounts they're able to achieve. And guess what? Flex allows for exactly that. So you have three winners, and then you saw some of the stats. Like we now have over 2,900 customers on Flex. You mentioned the 40% uplift when we move somebody from a non-Flex to a Flex. That's up from 34% the year before. You're looking at folks that are able to look at Flex and look at us and become meaningfully involved with us, with a Flex contract. and you've seen some of the the data with respect to you know what it what it looks like in terms of reflex so that's when a customer comes back to us after the original contract so let's say these contracts are you know pick a term five years six years seven years whatever the number is and you know when we originally came out with this thing Fatima we said well maybe maybe we get you know a reflex you know halfway through the contract or whatever it was it's eight

months people are coming back to us on average eight months into the contract not even a year and adding more so you've got you know reflex dynamics which you know surprised us in a very positive way meaning that customers are moving to us faster and with more as you think about flex as the de facto not even dominant just the de facto sales motion And how long should we expect to get to 100% of the ARR mix being flex, part A. Part B is, you know, as you cycle through and build more data points around reflex behavior, re-reflex behavior, and then, dare I say, re-reflex behavior. Again, we probably need to figure out a better term for that. What should that natural cadence be? because i think from a financial standpoint um is there a a concern or risk that you might be in a period where it could act like an ela cliff ela style cliff to your numbers right if you can help assuage some of those concerns as you drive more success with these very meaty long duration flex deals perfect so a couple of big picture items on flex um number one it's a commitment model not a consumption model.

That's number one. Number two, it's not an ELA. You're not getting an all-you-can-eat license with us. You have access to everything, but it is not an ELA. I lived through those. Didn't like those. No. Not great. No, not great. It was painful as a CPA. And then when I think about, you know, the reflex and the multi-reflex data, I think one of the strongest pieces of data we have with flex in general is the multi reflex so when a customer comes back more than once it's a 53% uplift from when they first initiated deal with us 53% that's massive so to me out of all the flex stats that we gave out on the earnings call and at Falcon that one stood out to me more than any of the others and the other ones were really strong but that one kind of said to me that hey look customers are going more with us customers want to kind of put their chips in with us and be our partners and and to me uh there was nothing more evident than again the scoreboard now why why does flex really work for us and maybe not so much for others right you've seen probably you know other flex uh you know flex type of licenses that other companies have come out with some companies they don't even change the name they call it flex Imitation is this serious form of flattery. Fair news, fair news. But here's the difference. For Flex to really work, you need multiple products. You know, we got 34 today. And they need to be turned on instantaneously, right? Time to market instantly. So you need those two things. And if you don't have those two things, Flex isn't going to be as powerful for you at all. So when we thought about it, we had that in mind. What are the things that are going to make Flex kind of, what's the moat around Flex? And it's those two things. Now, I, as an accountant, worked on, you know, for you guys and for myself and my own sanity, I wanted to make sure that the revenue recognition was the same as a non-Flex contract. Rattable recognition, so we worked with the auditors to be able to do that. And today, there's no mixed models for me. Like, no confusion. It's the same. And there's no additional things you need to add to your model or subtract or take out or fix. It's one model, before and after flex. So it saves me from doing a lot of conversation around mixed models, and it saves you in terms of being able to understand our business and make the appropriate investment decisions.

And what's that journey to 100% ARR?

Sorry about that one. So the journey is...

It was a multi-headed question.

Multi-headed question. Many of your questions are always multi-headed.

It's my specialty.

I need my notes to kind of keep up. So right now we're flex first. So basically, if you want to have a non-flex item, you've got to go to our president for an exception. And that's more painful. It's more scrutiny. Tell me exactly why the customer doesn't want to have a flex license. Have you done your job? It's not what you want to do. Plus, you know, you get paid more with a flex license. And so there's all these incentives to make sure that that happens. And I actually do see a world where there is no other license. It's just flex.

Bert, you said 34 modules under the umbrella today. I know you love all your modules equally. But in the spirit of it being fantasy football season, what are the modules in the portfolio that are in their rookie season that you feel very good about? and what are the modules that are your GOATs, your MVPs that are driving the bus?

The Giants are going to have a good year this year? I think so, right?

Feels like a Chiefs Super Bowl year to me, again.

You know, there's always hope at the beginning of the year with the Giants, so hopefully you guys do well. For us, though, you know, we've got multiple opportunities, right? So, you know, clearly the rookies, you know, you've got, you know, Guardian. And that's a, you know, as I said, that AIDR category is going to be, I think, bigger than EDR as a category. And then, obviously, SafeMind, I mean, that's just, we're the world's first security frontier model. And so I have high hopes for that one, too. I think it's going to get a lot of usage. I think if there's a, you know, we're going to have a different, you know, monetization, you know, go to market with respect to pricing on that one. and there'll be a pack of tokens, and then off you go with the upsell and additional packs. And then you've got the ones that we've disclosed for so many years. And you've got cloud, it's over a $900 million business, growing 29% year over year. You've got next-gen Seam, just under $700 million, growing 60% year over year. You've got next-gen Identity, just under $600 million, growing 33% year over year. All three of those can be IPOs. today's world which is different than we went public which the the bar is higher i think today to go public than when when we went out but all three of those today can be you know ipos you got exposure management which has grown um you know over the last quarter exposure management is is going to be huge like you've seen in the news anthropic finding all these vulnerabilities millions and millions of vulnerabilities there's no chance anybody could patch all those in a reasonable amount of time. But our exposure management, what does it do? It takes all those vulnerabilities and prioritizes them for you. So you know where to focus and can use us to help patch and remediate. And that's a benefit of what we're seeing with some of the great things that are coming out of the anthropics and opening eyes of the world, is they're able to find things out and then we can come in, prioritize them for you and make it real. So we're excited about exposure management in a big way um obviously you know i think when you you look at um endpoint and what's been happening there you know you've had four quarters in a row we've had acceleration the endpoint and that is because again go to the scoreboard we've done that because that's where ai is consumed right everybody can talk about whatever they want go to the scoreboard i used to always get the question about pricing about okay you're you're pricing to the bottom you're pricing security at the bottom. I'm like, what? My margins are best in breed. That dog doesn't hunt. So you guys are all financial experts. You look at the numbers. You look at the numbers first. Do that in this case as well. And the narrative should then play to the numbers. And if it doesn't, well, then do you have belief in these other companies or less belief? More belief, less belief. So that's how I think about it. So products, I can't, you know, it's like, pick your favorite pet, right? It's like, they're all kind of special to me. And, you know, I see just dramatic, you know, opportunity in front of us.

Bert, with exposure management, it seems that that is really hitting escape velocity, just right place, right time. time, what would behoove you in terms of what parameters are you stress testing to be able to give investors some more visibility around that quantitatively, largely because the word vulnerability at this conference was one of the most oft cited kind of term at the conference.

And so what would compel you to say, hey, this gives me confidence to carve this piece of the business out and talk about it in the same breath as your other billion dollar business almost billion dollar businesses like crowd ng sim and identity yeah i mean we're rapidly approaching you know the same you know cadence of disclosures for uh exposure management we gave out some data in the past we talked about it being a 300 million dollar business a few quarters ago and um in ending arr so it's it's it's definitely on that path i think that you know it increased uh quarter over quarter in terms of um you know its growth so i'm excited about you know exposure management and i'm excited about disclosing more data of exposure management as i am ai right so you know down the track i'm excited to be able to give out uh you know numbers uh disclosures on you know guardian uh more on and maybe as a group maybe i'll break that one out but you know as a group of different um you know products that we have that are ai related whether it's, you know, Charlotte or even, you know, Breakout, you know, obviously SafeMind. I mean, there's a few products in there that I would kind of categorize. I'm going through it now in my own head. Like, what's the—I want to give you guys, you know, as much knowledge as you can to make the most informed decision you can. I've been pretty good about, you know, transparency. It's been, I think, one of our hallmarks, right, in terms of giving you guys enough data to make the best decision you can. and highest and best use of your dollars. And so I think I'm gonna be giving those out in the not too distant future. Bear with me as I go through when I'm gonna be disclosing this stuff, but yeah.

No, we appreciate that. So we talked a lot about Flex as a conduit for more wallet share penetration and expansion. I wanna talk to you about Quiltworks as another go-to-market mechanism where you're finding strength in numbers by building very close partnerships with a very diverse constituency, let's say, right? So the same question around go-to-market and your ability to build consensus and a consortium-focused go-to-market.

Tell me about and tell us about Quiltworks and how that's distinct from traditional partner go-to-market motions. yeah so quilt works we we handpicked a bunch of companies to help us you know think through and go to market on a variety of things it could be you know in terms of looking at your health of your your security stack right you know can use them and us to kind of go in and say hey guys you guys are just you're way below the bar right and here's how we can help you so today we have 25 companies within quilt works they've generated or helped us generate 400 million in pipeline and TCV so it's clearly working and it gets us closer with the ecosystem right you know there we're gonna plant that we plan to have more in quilt works we think that it's a real powerful way to go to market we've got a great go-to-market motion on our partner side DB who runs our entire kind of alliances GSIs partners quilt works you've had the chance to meet him he's special you know before CrowdStrike even during CrowdStrike you know I always thought that companies kind of fail badly certainly in security on the partner side and the go-to-market side this guy transformed it for me you know took it to a different level you know Quilt works is only one one piece of it you know the the hyperscaler marketplaces is another one look at all the work we've done with Amazon we're even in Microsoft your arch nemesis yeah our biggest you know be you know and in fairness with the folks over at Microsoft we're trying to you know work together for resiliency together so we do we do things in in partnership even with Microsoft you know thank God Satya has about five businesses that are bigger than security you know to think about but you know we're you know they are they're everywhere right their OS is everywhere so you know for us you know the quilt works a piece is just another element of you know expanding our footprint and our and our reach right we've got great depth and these guys at breadth quilt works is is something that

you know continues to add breath in terms of our reach and I think it's I think it's brilliant um you know I think another one of the models that you helped pioneer was the ability to you know with the benefit of you know united terms and united and unified terms and conditions, help customers retire their hyperscaler spend towards CrowdStrike's portfolio of products. I know that was one of a more pioneering effort for you. Where are you on that journey with respect to, you know, GMV done with AWS, GMV done with Azure, and then certainly we can't leave GCP out of the mix, so.

We have all those guys, right? It's a model that works, right? and you know everybody's making money on it right so that's the key is you got to make sure that your partners make money right and if their partners are making money with you they're gonna stick with you and they're gonna do more with you so you know it's Microsoft such a big company right and they you know they're as I said they have businesses much larger than security so there are pieces of business that makes sense that we work together on right you know no one was more surprised you know than me two years ago when Satya was kind of at our you know on video at our that Falcon I mean we were trying to work together on resiliency and today we're actually doing business with them even though we're competing so as you know the industry kind of collides you're pricing more of that really I think in a good way I think it's a I think it's a positive thing look we're still competing as hard as we can in the marketplace for customer dollars there's no doubt but you know where we we can work together, we will. And a lot of that is because of DB and the team that DB has assembled. I mean, these are top shelf folks. Changed my whole view on go to market on the partnership side. I kind of come from the old school where you take your head of sales who needs to do something else and you put them out there and hope for the best. This is not who we are. Let's get the best person for the job, whatever it is, wherever they are, and make them the leader and fortify them.

Don't starve them. Fortify them.

At first, I'm the first to ask the questions about, you need how much to do what? What marketing programs for your partners do you want to do? How much do we want to spend? I'm kind of like T-Rex, like, wait a second. I promised the street that we're not growth at all costs.

We're very judicious about how we deploy our capital. but he comes with ROI I want to segue into a conversation about competition you know as you've gained prominence and yourself grown significantly larger and much bigger you know I'd argue your competitive set isn't your normal and usual suspects right how do you look at the landscape today and who do you see as your prime competitors and you know let's talk about the frontier labs right can we put some of the the fears and concerns to bed around their potential ability to usurp or commoditize any parts of your portfolio

and value proposition so yeah just kind of broad strokes the competitive landscape and what you are seeing today I love that question right so who are my competitors it's Microsoft Microsoft it's not even close yeah we have a section with you know Palo Alto and a section with Splunk and what-have-you Microsoft's our biggest competitor now having said that the frontier models I love that question right so let's make no mistake about it the frontier models for us the frontier labs these are friends of ours period great customers of ours great partners of ours you know we had ash from anthropic you know in in the investor session, and he came up on stage and said, we're using CrowdStrike to secure our business. CrowdStrike is the security operating system of our business. He said it on stage. It's on video. You can go back and listen to it. The reason is is that we're enabling the frontier models. They see us as a catalyst because they want deployment everywhere, but they know that there are CISOs out there and CISOs out there and companies out there that are fearful of these things going road, you know, pick one, hugging face one of them, whatever it is. They want us to secure it. So they're our biggest proponents. And what gives us confidence that, well, they just can't create a CrowdStrike? So Ask Bainwood stayed again, and he said, look, our cloud code and our really smart developers, they can't build a CrowdStrike. We can't reason our way to CrowdStrike. The other side of the coin is they don't have the data. We're net data creators. These labs need data. They need data with context. We have both those things. So the partnership is really hand in glove. We have all the data. We have the context around the data. You can use our data to be able to do whatever you need to do to give the highest and best outcomes for your customers, whoever they might be. So we feel that we're in a fantastic position with respect to the Frontier Labs, to be their partners for years to come. And they know it. Not only the Frontier Labs, we had Jensen on stage. And he's talking about how much of a partnership we have with NVIDIA, right? Because they recognize the same thing. They gotta make their chip safe, right? So, you know, George and folks like Jensen, they're trying to change the world. And I'm happy to have a front row seat.

Bird, on this theme of competition, I want to expand the definitional scope of it a little bit. About 15% of your business today is services, so professional services in the way and by way of incident response, breach assessment, breach remediation. Frankly, that would bring you some pretty unique angles and perspectives from a product development standpoint. So I want to ask you about how does the strategic nature or how does your professional services franchise stand to become more strategic in the era of AI where we're going to see higher volumes and variety and sophistication of breaches, number one.

And number two, where do you sort of draw the lines and rules of engagement with some of your partners who potentially can compete or would theoretically compete with you in that area how do you grapple those dynamics yeah so on our panel that we break out our services line it's about 5% right so it's not a big piece of our business having said that it's extremely strategic as you're pointing out right because we'll go in and you know someone will be using some shabby technology and get breached and we come in and fix it right that's what that business is but we also do assessments with quilt works for example and do some kind of forward-looking things to preventative medicine if you will to kind of make sure that the health of these companies is in good shape so for me you know I think about professional services as the tip of the spear it's our biggest lead gen I think it's it's one of those things that hey you know we're I'm I love it I want them for one thing selfishly cross sell my product whatever you do I you know be friends with the customer be there for them they talk to customers a lot cross sell the product we track that obviously that's what I care about what do those metrics look like on the cross so you know we haven't been giving them out but they're they're healthy maybe that's another one I might give out more of certainly with quilt works and everything else but that we have given it out in the past so we have we have done and it's pretty pretty robust and exciting for me and I don't care who uses our services and what they use our services for and even if you're a competitor in my services business and we're in a competitive environment and okay we lose but they use our tech afterwards I'm a happy guy win-win right so look I want my services business do well I want my services business to win I want my services business to grow but But it's not first of mind. It's the cross-up. It's all about product.

I want to shift gears into talking and asking you about how CrowdStrike is consuming and running on AI. So the influence of AI and how you've managed the business and managed a disciplined cost structure and envelope. So how are you balancing accelerating AI adoption at CrowdStrike internally, but also driving efficiencies that are visible on the P&L and to investors?

Yeah, let's take a look at the P&L. So we start with sales. So the sales team has AI type of tools that we use to help them with respect to prospecting, finding out what customers are using, how much they're using. So we're using AI for all that information. Go down to gross margin, our DevOps. So, we've got a very healthy gross margin. We're knocking on the door of my long-term model, which is, you know, 20, sorry, 30, where are we now? 20, I want to be between, I'd love to be 30, sorry, gross margin, I'd like to be between 82 and 85 is my model. We're at 81, so we're knocking on the door. We use AI in the DevOps area, which is basically our data centers, and we use AI to help find multiple data stores so that we can consolidate those. And then you go down to P&L and to our operating model, so you've got R&D. So we're using AI. Coders are using AI. they're actually you know I think like everybody else coders or the traditional coders are turning into reviewers and they're turning into folks that can use ten agents and just review and make sure the code that's the that the agents are spitting out is accurate and correct so you're becoming really efficient at what you're doing and you're accelerating you know what you're doing in your business from an R&D perspective and even in G&A think about legal you know you have all these companies that are out there you know doing good work that we can leverage. Lagora is one of them that's out there that you can leverage and you can look at a contract and just isolate all the non-unique and unique terms. So we're using it there. I use it in finance for automation. I close my books, by the way, in a day. So in one day, I can go to you guys. Now the auditors take time to go review everything, but I'm ready to go to you guys to the street in a day. One quarter, it was day zero, I could go to you guys. And that is a lot of automation that's a lot of ai in there to kind of help me through that so it's it's manifesting itself you know across every line in the pnl in terms of top line in terms of bottom line we're trying to be efficient with our use when i budget so i have lines in the budget for every group and i budget you know a certain amount of ai spend tokens right so i have amount of tokens that each group can have and that's what you have and your here's your overall envelope expense envelope and tokens is part of it as part of it and we have we have technology that can monitor usage meter usage so if you're over a certain amount you're cut off and then we investigate

why you're burning through tokens faster than you should and if it's for good stuff great you get more if you're if you're building a you know a game you're out right so we we do monitor this stuff um so we're using it prevalently in our work um bird i think it's important uh spending a little bit more time on you know the gross margin banding that you shared right 82 to 85 as the business continues to become more data intensive in terms of telemetry generation from agents and a bigger footprint i mean what are some of the things that you're doing to be able to maintain such a high watermark of gross margins as you are ingesting you know even greater torrents and avalanches of data and digital exhaust to be more efficacious for your customers?

Look, this is my favorite topic.

Love gross margins. You were 30% gross margin 12 years ago.

We were talking about that when we were private, and I said, I'm going to turn this company around, and I'll take it public on gross margins. So we've done a great job, obviously, but we've got more to go. So when we think about who we are today, we've got public cloud, private cloud on the public They're partners. They're doing great. We look for less expensive areas by geo, so there could be, you know, for example, Amazon has West 2 versus West 1, which is a lower cost, you know, colo, and we use more of that. You know, we're now pretty big, and so we consume more, so we leverage the discount capability, so with the public clouds. Private side, you know, we have our own clouds, and we're looking for opportunities through AI, some of it, in terms of the multiple data stores, but also, you know, migrations. What are the expensive things that we're paying for in the cloud that we could do ourselves? So, you know, I feel good about our trajectory to get to, you know, even the higher end of the long-term model and gross margin because of those things. I think it really helps. Now, I'm sure that some of you are thinking, well, for your own data centers, isn't the cost of, you know, a big iron expensive for you folks? And, yeah, I talked about it at Falcon. on, it's gone up to 11%, 12%, or projecting to go up to 11%, 12%. But I've already baked that into my free cash flow margin for FY28. I said it's going to be 32 and 1 half. So I've taken up my free cash flow margin, knowing that I'm still going to have some of these expenses that I'm going to have to pay for with respect to more expensive hardware. So I feel pretty good about all of that combined.

This is a great way for me to round-trip back to, you know, our opening dialogue around your medium-term financial targets, which you did update last week. So whereas we were looking at a $20 billion ARR target in Fiscal 36, we're now talking about that within Fiscal 35. Whereas we were looking at a $10 billion ARR bogey in Fiscal 31, excuse me, we're now looking at it within fiscal 30. What are the three most sensitive or influential catalysts that would have those outcomes happen in fiscal 29 and in fiscal 33?

Yeah, look, I mean, Guardian, that could be something that can, you know, propel it for sure. You have, you know, just the continuation of the the big three that I like to call them, Next-Gen SimCloud, Next-Gen Identity. Next-Gen Identity, we'll probably talk about it if we have time. But that's a huge catalyst for us, right? We've spent a lot of money. We've bought a lot of companies within that category, and it's done extremely well. As I said, that is part and parcel with what we're seeing in this AI revolution. So I think those are some of the things that can continue to help us get to those targets in the first place, and hopefully if they do really, really well, exceed them. And remember, when we think about the $20 billion, We gave examples at Falcon that we only need to penetrate those TAMs at about 3.5% across the board. 3.5%? We're averaging 4. And when does well, you're miles past it. So I get really excited about how low the bar is in terms of market penetration to get there on a product basis. So I think that with our go-to-market engine, Flex, all these things combined, I feel really good about bringing in those dates with hitting 10 billion and 20 billion.

Bird, I want to end our conversation asking you about capital allocation, especially around M&A, your size, your scale, alongside how rapidly we're watching IT lines blur between one another. How do you think about transformational and larger M&A?

You've got the share price currency for it you've got the market size and dominance and heft for it what is the framework for M&A today and how has that evolved in the last two years you know it's actually stayed pretty constant we're looking for great tech and great people it starts there we're not buying ARR like some of our competitors we're looking look if we found a you know a much bigger company and it obviously came with ARR but it had great people great tech we're gonna to do it the bar for us isn't a price obviously it's a it's an input is price but it's the tech so if a company that we're looking at has an agent and we can't smash that agent into ours it's an immediate no if we don't see a path or it's a passive and it'd be too long and we got to rewrite the whole thing no you're we're not buying it having said that if it's if we see a path then then And that's past that bar. And for us, it's about the integration, the seamless integration. That's the starting point. Price, we negotiate. Whatever it is, if it makes sense, we're going to find a way. But it's really about the tech. So for me, I would love to do bigger deals. I'd like to do more deals. I'd like to do bigger deals. I'd like to do it all. But in this case, the CFO is not the gatekeeper. It's the tech people. It has to fit in. When we bought Preempt, which was the base of our security product, we knew that at the time it was going to be year, year and a half to kind of integrate. And we said it's worth it. So we bought it. We waited the year, year and a half. We integrated it seamlessly. And then we started to sell it, to sell it. And you see the results today. so today with ai and everything else we think that you know if there's a technology like that today we'd be able to integrate it a hell of a lot faster maybe even as quick as half the time so these are all good things for us uh in the end for us to be thinking about m and a and i think our ce george our ceo and our president mike sentonis they get 10 calls a week i get calls from your other side on the on the best for banking side bert think about this one think about that one and then we have a whole ecosystem of folks that constantly are calling us with respect to the companies that they think could fit well with us and you know so we've got a huge and healthy pipeline we also have hired a guy out of okta to run our corp dev uh peter size gork so he's a machine he's able to siphon through all these companies and give us the take on them pretty fast uh you know rapidly understanding how they can fit into our into our company so we have we do have um you know a machine but we're not out there buying arr that's not who we are buying great tech great people that's never going to change big company could come with arr and so be it we'll be prepared for that but my last question for you is what is one consistent palpable salient uh investor misunderstanding or misperception that you'd like to wave away yeah so the the one thing that i'd love to leave you all with is that the mythos moment wasn't you know just the start of something it's going to be enduring it's long and it's not just about guardian it's about selling the platform the conversations that we've seen the demand that we've seen post the mythos moment has been incredible it's in the numbers it's back to the scoreboard and so I'd love to leave you all with the notion that the mythos moment wasn't just about you know guardian it was about you know folks consolidating with us highest and best use of their dollars going with us being a strategic partner with us being you know growing with us and us being able to enable them to you know roll out agents but also protect all their other environments whether it's cloud whether it's endpoint whatever it is i think that's the biggest you know it's not a misconception it's something that maybe the light bulb doesn't go off for everybody to say it's more than just guardian what we saw with the mythos moment that's that's the biggie for me uh you know i think we're at this moment in time where um it doesn't come too often this was a gift this is a gift to us and i'll take gifts um but i think it's a big one i think it's transformative for us as a company i think it's um it could be the biggest act in our company history so hopefully you get the same feeling in listening to me talk today and your great questions to get that feeling that that's truly how i feel so bert fortune favors they're ready so yeah we're watching thank you so much thank you this is fantastic i appreciate it thanks