In late January, cloud-based cybersecurity company CrowdStrike (NASDAQ: CRWD) surpassed a $100 billion market cap valuation for the very first time in its history. That valuation places CrowdStrike in rarified company -- few businesses are worth this much, regardless of the industry. But among pure-play cybersecurity companies, it's in even more elite company.
Palo Alto Networks (NASDAQ: PANW) is the only other pure-play cybersecurity stock that's achieved a $100 billion market cap. But there is a distinction between these two companies. Palo Alto Networks was founded in 2005 and passed a $100 billion valuation in late 2024. For its part, CrowdStrike was founded in 2011 and passed this milestone in early 2025.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »
In other words, Palo Alto Networks passed the $100 billion threshold mere weeks before CrowdStrike. But CrowdStrike had six fewer years to get there.
The road to $100 billion included speed bumps -- CrowdStrike had a catastrophe less than one year ago. The company calls it the "July 19 incident." A software update contained an error that knocked out information technology systems around the world. The stock plunged more than 40% as investors wondered if it would lose business. But the stock came roaring right back to new highs, because CrowdStrike's business didn't skip a beat.
Considering CrowdStrike is so big already, is the stock now as high as it will ever be? That's a question worth exploring.
What could this mean for investors today?
For what it's worth, Palo Alto Networks hired current CEO Nikesh Arora in 2018, and he soon went on record predicting that his company would be the first $100 billion cybersecurity business -- score one for Arora with this prediction come true. The company is known for its leadership position in firewall hardware devices. But with a lot of acquisitions, Arora has positioned the company as a one-stop shop for cybersecurity.
Being that it focuses on the entire cybersecurity space, Palo Alto Networks' business does overlap with CrowdStrike, which is more focused on cloud-based endpoint security. But I believe there's room for both businesses.
According to multiple third-party research firms, the cybersecurity space is worth hundreds of billions of dollars and is expected to grow at a double-digit compound annual growth rate (CAGR) for years. In short, the space is large and growing fast, which means that multiple companies can participate in the upside, including both Palo Alto Networks and CrowdStrike.
For its part, CrowdStrike does have multiple things going for it. First, it's recognized as a leader in the cybersecurity products that it offers. For example, Gartner named it a leader in endpoint security for the fifth straight year in 2024. With this validation, customers are willing to give it a try, which unlocks an interesting opportunity for CrowdStrike.
CrowdStrike doesn't offer a single software product, but rather an entire platform called Falcon. Within Falcon, the company offers 29 separate software modules that work together and are easily deployed as needs arise. This has helped it achieve an incredible growth rate in recent years -- existing customers progressively subscribe to new modules, boosting their annual spend.
There's an advantage to a business model such as this: There are up-front costs associated with winning a new customer. But much of that expense (such as sales and marketing) isn't there when customers buy additional modules. This means that incremental revenue from new modules by existing customers is higher margin.
This dynamic is why CrowdStrike is enjoying fast revenue growth as well as fast free cash flow growth. Its modules are easy to deploy, leading to fast growth. And each new module is high margin, leading to a boost in free cash flow.
CRWD Free Cash Flow Per Share data by YCharts
Now, CrowdStrike obviously had much higher long-term upside when it was still a small company. That said, I don't believe the good times are over for shareholders now that the company is worth $100 billion. Companies that sustain high growth rates are consistently among the best long-term stock performers. Those that also maintain profitability are even stronger contenders. And I believe that CrowdStrike can keep doing both.
As noted, the cybersecurity market provides plenty of additional market opportunity for CrowdStrike today, so its revenue growth rate could stay high for the foreseeable future. Accordingly, its guidance for the upcoming fourth quarter implies a strong growth rate of over 20%. And since so much of its growth could come from the adoption of additional modules, there's good reason to believe free cash flow will stay strong as well.
In summary, CrowdStrike's rapid rise from start-up to $100 billion company underscores growth trends in cybersecurity, the company's leadership position in the space, and its advantageous business model. The long-term trends also remain in CrowdStrike's favor, meaning that $100 billion probably won't be the last momentous milestone on this journey.
Should you invest $1,000 in CrowdStrike right now?
Before you buy stock in CrowdStrike, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and CrowdStrike wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $727,150!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of February 3, 2025
Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike. The Motley Fool recommends Gartner and Palo Alto Networks. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
