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CrowdStrike stock drops nearly 20% as new subscriptions slow

CrowdStrike Holdings Inc. shares dropped in the extended session Tuesday after the cybersecurity company said new subscriptions came in below expectations amid macro headwinds.

CrowdStrike 
CRWD,
-1.04%

shares plummeted more than 17% after hours, following a 1% decline in the regular session to close at $138.

The company reported a fiscal third-quarter loss of $55 million, or 24 cents a share, compared with a loss of $50.5 million, or 22 cents a share, in the year-ago period. Adjusted net income, which excludes stock-based compensation and other items, was 40 cents a share, compared with 17 cents a share in the year-ago period.

Revenue rose to $580.9 million from $380.1 million in the year-ago quarter. Annual recurring revenue, or ARR, a software-as-a-service metric that shows how much revenue the company can expect based on subscriptions, grew 54% to $2.34 billion from the year-ago quarter, while the Street expected $2.35 billion.

Analysts expected CrowdStrike to report earnings of 28 cents a share on revenue of $516 million, based on the company’s outlook of 30 cents to 32 cents a share on revenue of $569.1 million to $575.9 million.

“However, total net new ARR was below our expectations as increased macroeconomic headwinds elongated sales cycles with smaller customers and caused some larger customers to pursue multi-phase subscription start dates, which delays ARR recognition until future quarters,” said George Kurtz, CrowdStrike’s co-founder and chief executive, in a statement.

Read: Cloud software is suffering a cold November rain. Can Snowflake and Salesforce turn things around?

The company expects adjusted fiscal fourth-quarter earnings of 42 cents to 45 cents a share on revenue of $619.1 million to $628.2 million, while analysts surveyed by FactSet forecast earnings of 34 cents a share on revenue of $633.9 million, according to analysts.

CrowdStrike expects full year earnings of $1.49 to $1.52 a share on revenue of $2.22 billion to $2.23 billion. Wall Street expects $1.33 a share on revenue of $2.23 billion.

So far, in November, cloud software stocks have been getting trashed. While the S&P 500
SPX,
-0.16%

has gained 2%, and the tech-heavy Nasdaq Composite
COMP,
-0.59%

is flat, the iShares Expanded Tech-Software Sector ETF
IGV,
-0.78%

has fallen more than 2%, the Global X Cloud Computing ETF
CLOU,
-1.12%

has declined more than 4%, the First Trust Cloud Computing ETF
SKYY,
-0.74%

has fallen more than 6%, and the WisdomTree Cloud Computing Fund
WCLD,
-1.05%

has dropped more than 11%.

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