CRWD — Q2 2026 (Fiscal Q2 FY2027) Financial Report Analysis

Revenue up 26%, but the flip to a GAAP profit came from the bank account, not the business

CrowdStrike's quarter ended July 31, 2026 — the company's own fiscal second quarter of FY2027, since its fiscal year ends January 31 — produced $1.47 billion of revenue, up 25.8% from $1.17 billion a year earlier, and the first positive bottom line the company has shown in a second quarter since the July 2024 outage. Net income was $5.3 million, or $0.01 per diluted share, against a $70.2 million loss ($0.07 per share) a year ago.

That headline overstates the turn. CrowdStrike still lost money on operations: the loss from operations was $33.2 million. The company only cleared zero because it earned $43.9 million of interest on its $5.0 billion cash pile and recorded a $1.4 million tax benefit rather than a tax charge. Strip out the interest and the quarter is still a loss.

ARR — annual recurring revenue — is the annualized value of subscription contracts in force on the measurement date, the standard way software companies size their recurring book of business. "Net new ARR" is how much that book grew during the quarter, after customers who cancelled or shrank. Operating margin is the share of revenue left after the cost of running the business, before interest and tax.

Half the operating improvement is a comparison artifact

The operating loss narrowed by $72.2 million year over year. Roughly $38.4 million of that is simply the absence of a charge: in the year-ago quarter CrowdStrike booked $38.4 million of restructuring costs under what it calls the Strategic Plan (severance and related costs from its FY2026 workforce reduction), spread across cost of revenue, sales and marketing, research and development, and general and administrative lines. There were no such charges this quarter. Adjusting for that one-off, the underlying operating loss improved by about $34 million on $302 million of incremental revenue.

Where the improvement is real is sales efficiency. Sales and marketing expense rose only 14.2%, to $510.0 million, against 25.8% revenue growth — so it fell from 38.2% of revenue to 34.7%. That is the single clearest sign the post-outage selling environment has normalized: the company is adding a quarter more revenue without adding a quarter more sales cost.

Research and development went the other way, up 29.7% to $444.2 million and rising as a share of revenue from 29.3% to 30.2%. Nearly half that increase — $48.5 million of the $101.7 million — was additional stock-based compensation, with the rest driven by a 17% increase in average R&D headcount, $12.5 million more in cloud hosting, and higher allocated overhead. General and administrative expense was flat at $176.0 million, as lower July 19 Incident costs and the absence of restructuring charges offset higher stock compensation.

The stock-compensation gap between GAAP and "adjusted"

Stock-based compensation — the accounting cost of shares and share units granted to employees, a real expense under GAAP that consumes no cash — was $376.9 million, or 25.6% of revenue, up from 23.9% a year ago. It grew 34.8%, faster than the 25.8% revenue line.

This matters for anyone reading CrowdStrike's own adjusted numbers alongside these. The 10-Q presents no non-GAAP measures, so nothing here can be reconciled to them, but the arithmetic is unambiguous: stock compensation alone is more than eleven times the size of the $33.2 million operating loss. Any "adjusted operating profit" for this quarter is, in substance, the GAAP loss plus that $376.9 million. The cost is borne by shareholders through dilution, and it is showing up: diluted share count rose 4.5% year over year to 1,044.5 million even though CrowdStrike spent $175.6 million buying back stock in the first half.

Demand: ARR reaccelerated, and the outage drag is fading

The forward-looking demand signal is better than the income statement. ARR reached $5.84 billion, up 25% year over year against 20% growth a year earlier — an acceleration, not a deceleration. Net new ARR added in the quarter was $332.8 million versus $221.1 million a year ago, up 50.5%; for the six months it was $588.6 million versus $414.8 million.

Management attributes subscription growth to "a combination of the addition of new customers and the sale of additional sensors and modules to existing customers," and states that its dollar-based net retention rate — the measure of whether existing customers spend more or less this year than last — "improved sequentially as of July 31, 2026." CrowdStrike does not disclose the actual retention percentage, so the direction is all a reader gets.

Contracted future revenue supports the trajectory: remaining performance obligations — signed, non-cancellable business not yet recognized as revenue — stood at $10.7 billion, of which the company expects to recognize about 46% within twelve months. Deferred revenue (customer cash already collected) was $4.8 billion, and there is a further ~$5.9 billion of backlog that has not yet been invoiced and so appears nowhere on the balance sheet.

Growth is tilting international. US revenue rose 21.7% to $954.5 million, while Europe/Middle East/Africa rose 39.9% to $263.7 million and Asia Pacific rose 34.3% to $157.9 million. The US share of revenue fell from 67% to 65%. The filing does not break out currency effects on revenue, so how much of the faster overseas growth is genuine volume versus a weaker dollar cannot be determined from this document.

Cash: strong collections, heavy spending

Operating cash flow for the six months was $1.12 billion, up 56.4% from $716.9 million. A large part of that increase is working capital timing rather than earnings: accounts receivable fell $324.2 million over the half (from $1.36 billion to $1.04 billion), which converts to cash once and does not repeat at that scale. Capital spending was $222.0 million on property and equipment plus $49.1 million of capitalized internal-use software, leaving roughly $850 million of free cash flow for the half on that definition.

Despite that, total cash fell from $5.23 billion at January 31 to $5.01 billion, because CrowdStrike spent $881.4 million (net of cash acquired) on acquisitions: SGNL.AI (continuous identity security, February 20) and the remaining 90.6% of Seraphic Algorithms (browser runtime security, February 3). Goodwill jumped from $1.36 billion to $2.25 billion and intangible assets from $136.7 million to $273.2 million as a result. In July the company also signed to acquire the technology assets of XM Cyber for $145.0 million in cash and stock plus additional shares, expected to close in the second half of fiscal 2027.

One item inflates the six-month profit and deserves separating out: consolidated net income for the half was $51.3 million, but only $33.1 million was attributable to CrowdStrike shareholders — $18.2 million belonged to outside investors in the company's Falcon Funds. Six-month other income of $34.6 million (versus a $6.6 million expense a year earlier) came largely from investment gains, including $36.4 million of realized gains on strategic investments and a $15.5 million gain from remeasuring the Seraphic stake CrowdStrike already owned before buying the rest. Those are portfolio gains, not operating performance.

July 19 Incident: costs small, exposure still open

Direct costs from the July 2024 faulty sensor update are now modest — $3.6 million of expense net of insurance receivable in the first half, with the remaining accrual down to $13.1 million from $15.5 million at January 31. But CrowdStrike states plainly that it cannot estimate possible losses from the outstanding lawsuits and inquiries, and that its customer commitment packages (discounts, extra modules, free services, extended subscription terms) "have resulted, and are expected to continue to result, in increased contraction, due to elongated subscription terms, and decreased upsell dollar values." Extending a subscription term stretches the same contract value over more quarters, which mechanically suppresses reported revenue growth and retention rates even when the customer stays.

A restated comparison base

Readers comparing against last year's published numbers should note that the prior-year figures here have been revised. In the fourth quarter of FY2026 CrowdStrike identified an immaterial error in the timing of stock-compensation recognition on awards granted in FY2022 and FY2023, and restated the July 31, 2025 quarter: expenses came down by $7.5 million and the reported loss per share improved from $0.08 to $0.07, with $29.0 million of expense pushed back into earlier periods (accumulated deficit at the earlier date rose correspondingly). The effect is small, but it means this quarter's year-over-year improvement is measured against a slightly better base than originally reported.

Takeaway: The first GAAP-profitable second quarter since the outage is not evidence of an operating turn — the business still lost $33.2 million before interest, and roughly half the year-over-year improvement is the absence of a $38.4 million restructuring charge. The genuine signal is on the demand side: net new ARR of $332.8 million was up 50% and sales and marketing costs grew at half the rate of revenue, which is what an outage recovery actually looks like on the income statement.

What to watch

A 10-Q carries no earnings guidance, so there is no revenue or margin forecast in this document. What the filing does commit to is spending. CrowdStrike says it expects both sales and marketing and research and development expenses to keep rising in dollar terms, and expects to keep incurring significant legal and professional fees tied to the July 19 Incident. Non-cancellable purchase commitments — mostly data centre capacity and software — totalled $4.14 billion at quarter end, and the company disclosed that after July 31 it committed to a further $2.9 billion running through fiscal 2034. That is close to $7 billion of contracted infrastructure spend against a $5.8 billion recurring revenue base, which tells you the company expects to be several times larger and has pre-bought the capacity to get there.

Our read on the trajectory: with 46% of a $10.7 billion contracted backlog scheduled to convert within twelve months and ARR growth accelerating to 25%, revenue growth in the mid-20s looks well supported into the second half of fiscal 2027. The question is whether GAAP profitability sticks once the easy comparisons run out. The two levers that produced this quarter's profit — a vanished restructuring charge and $43.9 million of interest income — both weaken from here: the restructuring comparison disappears entirely after this year, and interest income already fell 13.7% year over year as rates and the cash balance came down, with $881 million of that cash now spent on acquisitions. Durable profit therefore has to come from sales-and-marketing leverage continuing while stock compensation, currently growing 35% a year against 26% revenue growth, slows to below the revenue growth rate. It has not done so yet.