Why Is CrowdStrike Stock Dropping Now?

Why Is CrowdStrike Stock Dropping Now?

CrowdStrike (NASDAQ: CRWD) has been one of the most talked-about cybersecurity stocks in 2025. After rallying more than 60% in the past year and hitting an all-time high of $517.98 in July, investors are now asking a pressing question: why is CrowdStrike stock dropping? Shares have since fallen back to the mid-$440s, and the decline reflects a mix of company-specific issues, sector pressures, and broader market concerns.

Earnings Beat But Why is CrowdStrike Stock Dropping?

On August 27–28, CrowdStrike reported $1.17 billion in revenue, up 21% year-on-year, with adjusted EPS of $0.93. Both numbers topped Wall Street estimates. The company also added a record $221 million in new annual recurring revenue (ARR).

Yet, shares slid nearly 8% after hours. The reason comes down to guidance. Management projected Q3 revenue of $1.208–$1.218 billion, just shy of the ~$1.23 billion consensus. When a stock trades at a premium, even slight gaps in expectations can drive selling pressure. This is another reason why CrowdStrike stock is dropping despite strong fundamentals.

Legal Fallout From the 2024 Outage

The July 2024 outage, caused by a faulty Falcon Sensor update, still haunts the company. CrowdStrike has acknowledged a $10–15 million quarterly revenue drag from remediation efforts and expects $51 million in cash payments in Q3.

Legal risks are also significant. Delta Air Lines is suing for more than $500 million in damages, and shareholder lawsuits are still active. These ongoing liabilities highlight another factor in why CrowdStrike stock is dropping. Investors worry that litigation could weigh on earnings for quarters to come.

Sector and Macro Headwinds

On August 8, rival Fortinet reported weaker results and noted that its firewall refresh cycle was already 40–50% complete. This sparked fears of slowing demand across the cybersecurity sector. As a result, CrowdStrike shares fell 5.6% in sympathy.

This sector-wide concern helps explain why CrowdStrike stock dropped, even when its own business metrics remained strong.

Valuation Concerns Add to the Question

CrowdStrike currently trades at a price-to-sales multiple in the mid-20s, far above peers at 8–12x. Analysts argue that at such lofty levels, even small disappointments can trigger outsized declines.

In early September, multiple firms trimmed their price targets. UBS lowered its target to $500, citing net new ARR that came in at the lower end of expectations. This re-rating is another reason why CrowdStrike stock is dropping in 2025.

Rising Costs and Margin Pressure

Despite strong revenue growth, GAAP results showed a net loss of $0.31 per share last quarter. Higher stock-based compensation, operating expenses, and legal costs have raised concerns about profitability. For investors, ballooning costs alongside premium valuation is a key driver behind why CrowdStrike stock is dropping.

Long-Term Outlook Remains Strong

It’s important to remember that not all signals are negative. About 95% of CrowdStrike’s revenue comes from subscriptions, providing stable recurring income. The company continues to expand its Falcon platform into cloud, identity, and security operations, with Charlotte AI positioned as a growth catalyst.

These fundamentals mean the long-term story is intact, even as short-term volatility leaves investors wondering why is CrowdStrike stock dropping today.

Bottom Line: Why Is CrowdStrike Stock Dropping?

The pullback is driven by:

• Guidance slightly below Wall Street expectations
• Lingering costs and lawsuits tied to the 2024 outage
• Sector-wide weakness after Fortinet’s warning
• A premium valuation that leaves no room for error
• Rising expenses that cloud profitability

In short, the stock is under pressure not because the business is failing, but because expectations are sky-high. That’s why CrowdStrike stock is dropping despite continued growth in revenue and ARR.