Can Rising AI Security Adoption Help CrowdStrike Challenge PANW & ZS?

CrowdStrike Holdings CRWD is seeing stronger demand for cybersecurity as enterprises increase their use of artificial intelligence (AI). The company believes AI adoption is creating new security needs across endpoints, cloud workloads, identities, data and AI agents. This is helping drive demand across several parts of its Falcon platform and should help CRWD strengthen its position against cybersecurity rivals such as Palo Alto Networks PANW and Zscaler ZS. In the first quarter of fiscal 2027, CRWD’s net new annual recurring revenues (ARR) rose 32% year over year and ending ARR increased more than 24% year over year.

AI Detection and Response (AIDR) is emerging as an important new growth area for CrowdStrike. In the first quarter, AIDR's ending ARR grew more than 250% sequentially. Further, AIDR has already secured a pipeline of more than $50 million for the second quarter of fiscal 2027. Management expects AIDR to be a larger opportunity than endpoint detection and response because it can protect AI data, models, prompts, agents, identities and infrastructure. CrowdStrike's endpoint business also accelerated for the third consecutive quarter as the use of AI tools increased the attack surface.

The AI trend is also supporting CrowdStrike's other businesses. Next-gen SIEM exceeded $600 million in ending ARR, while the combined next-gen SIEM, cloud and identity businesses surpassed $2 billion in ending ARR. CrowdStrike said higher AI workloads are increasing the need to secure cloud environments and manage more security data. This is fueling growth in the company’s identity business as companies look to control AI agents and other nonhuman identities. For instance, Falcon Shield's ending ARR nearly quadrupled year over year in the first quarter, as organizations increasingly look to secure their Agentic attack surface.

The strong demand has led CrowdStrike to raise its outlook for fiscal 2027. The company increased its net new ARR growth guidance for fiscal 2027 by 520 basis points and now expects 27.7% growth at the midpoint. CrowdStrike expects ending ARR in the range of $6.532-$6.556 billion, indicating an increase of 24-25% year over year. As AI adoption expands, broader use across employees and workloads should create additional opportunities for CrowdStrike.

How Competitors Fare Against CRWD

Palo Alto Networks is also using the growing need for AI security to drive demand across its platform. Its Prisma AIRS platform is designed to secure AI applications and agents from development through runtime. Prisma AIRS reached more than 300 customers in the third quarter of fiscal 2026, up from 100 in the previous quarter, and the company expects the product to reach $100 million in ARR within the next few quarters.

Zscaler is seeing strong adoption of its Zero Trust Everywhere strategy, which is helping the company expand beyond its traditional user security offerings. The strategy combines security for users, cloud workloads and branch locations on a single platform. The company ended the third quarter of fiscal 2026 with more than 700 Zero Trust Everywhere enterprises, up from more than 550 in the previous quarter. As more customers adopt multiple products across the platform, Zero Trust Everywhere could help Zscaler increase customer spending, win larger deals and support long-term growth.

CRWD’s Price Performance, Valuation and Estimates

Shares of CrowdStrike have jumped 62.9% in the year-to-date period compared with the Zacks Security industry’s return of 72.9%.

CRWD YTD Price Return Performance

Image Source: Zacks Investment Research

From a valuation standpoint, CrowdStrike trades at a forward price-to-sales ratio of 29.15, significantly higher than the industry’s average of 17.58. The Zacks Value Score of F also suggests that CRWD stock is overvalued.

CRWD Forward 12-Month P/S Ratio

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for CrowdStrike’s fiscal 2027 and 2028 earnings indicates year-over-year growth of 32.3% and 27.0%, respectively. The estimates for fiscal 2027 and 2028 have remained unchanged over the past 30 days.

Image Source: Zacks Investment Research

CrowdStrike currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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