Cybersecurity ETFs Surge After CrowdStrike Results

Cybersecurity ETFs Surge After CrowdStrike Results

The second-largest cybersecurity company by market value’s strong earnings boosted market sentiment.

sumit
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Senior ETF Analyst
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Reviewed by: etf.com Staff
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Edited by: James Rubin

Shares of cybersecurity company CrowdStrike soared on Wednesday after reporting strong earnings results, lending support to an industry that has faced some headwinds recently. 

CrowdStrike Holdings Inc. gained nearly 10% midday Wednesday after it said that revenues in the first quarter grew by 33% to $921 million, ahead of the $905 million consensus analyst estimate. 

Adjusted earnings per share came in at $0.93 versus the $0.90 that analysts were expecting. 

With a $81 billion market cap, CrowdStrike is the second-largest pureplay cybersecurity company, behind only Palo Alto Networks, which is worth $95 billion. 

However, CrowdStrike has trounced its rival in performance this year, with a gain of 31.5% versus 0.2%. 

Earlier this year, Palo Alto Networks Inc. plummeted by 28% in a single session after cutting its revenue outlook for the current year.  

More recently, software stocks broadly tanked after Salesforce Inc. forecast underwhelming growth for this year, raising worries that customers were prioritizing spending on AI over traditional software offerings. 

But CrowdStrike is bucking the trend, with shares trading close to all-time highs. And the company is touting its AI capabilities.  

“We built the right architecture from the start— the industry's lightest weight, easiest to install sensor embedded with AI, no system reboot required, a single AI-native platform console, not disparate stitch together or siloed multi-platforms,” CrowdStrike CEO George Kurtz said on the latest conference call. 

ETFs With Large CrowdStrike Holdings

With a 7% weighting, CrowdStrike is the largest holding for both the First Trust NASDAQ Cybersecurity ETF (CIBR), as well as the Global X Cybersecurity ETF (BUG)

Its 7% weighting makes it the No.2 largest holding in the Amplify Cybersecurity ETF (HACK)

Cybersecurity ETFs have underperformed this year, with returns ranging from flat (HACK) to -4.1% (BUG). 

The struggles of Palo Alto Networks and software stocks broadly have weighed on the ETFs. 

However, CrowdStrike’s strong results may act as a tailwind for the funds. On Wednesday, all three of the ETFs were trading up by around 2%. 

CrowdStrike and its competitors provide a mission critical service to their customers. Thus, despite the hype around generative AI, demand for cybersecurity services is unlikely to falter, they argue. 

CrowdStrike raised its revenue forecast for the year to $3.98 billion to $4.01 billion, up from $3.92 billion to $3.99 billion previously. That represents growth of more than 30% year-over-year.  

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.