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Software finally had a good night
Investors have spent much of the year questioning whether AI will accelerate software growth or slowly eat into it.
On Wednesday, two of the industry’s biggest names gave them something else to think about.
CrowdStrike delivered record net new ARR and raised its outlook again. Salesforce posted its strongest new business growth in four years and pointed to organic revenue reacceleration ahead. Both stocks surged more than 10% after hours.
But the more interesting part is where the growth is showing up and what the market may have missed by lumping all software into the same basket.
Today at a glance:
🦅 CrowdStrike: What Doesn’t Kill It
☁️ Salesforce: SaaSpocalypse Pushback
🦅 CrowdStrike: What Doesn’t Kill It
For years, the CrowdStrike investment thesis has been that every new threat makes Threat Graph, the AI brain behind Falcon, smarter. The past two years suggest something similar about the company itself.
In July 2024, a faulty update caused one of the largest IT outages in history and put customer trust under extraordinary pressure. Two years later, CrowdStrike just delivered what CEO George Kurtz called the best quarter in company history.
Revenue grew 26% Y/Y to $1.47 billion ($30 million beat), marking the fifth consecutive quarter of acceleration, while non-GAAP EPS reached $0.31 ($0.02 beat).
Non-GAAP operating income jumped 46% to a record $372 million, a 25% margin, while free cash flow reached a Q2 record $377 million, up 33% Y/Y.
The GAAP picture remains less flattering, with the company still showing an operating loss margin of 2%. The main reason was stock-based compensation, which accounted for roughly 26% of revenue.
The recurring-revenue engine remains the main KPI:
Ending ARR grew 25% Y/Y to $5.84 billion, continuing a remarkably predictable trajectory.
Net new ARR reached an all-time record $333 million, up 51% Y/Y, accelerating sharply from +32% last quarter. New-logo net new ARR also hit a record, while both gross and net retention improved, showing that the acceleration extends beyond existing customers buying more modules.
The Flex Flywheel
Ending ARR from Flex customers surged 101% Y/Y to $2.29 billion, already approaching 40% of CrowdStrike’s total ARR. More than 935 accounts adopted Flex during the quarter.
Customers moving to Flex increased ending ARR by roughly 40% on average, while platform adoption continued to deepen.
The appeal of Flex is simple: customers commit a security budget upfront and can deploy it across Falcon modules over time, making it easier for CrowdStrike to consolidate more security workloads onto a single platform.
AI Creates More to Secure
The Mythos moment we discussed last quarter is also becoming clearer in the numbers.
