CrowdStrike, a cybersecurity firm that has enjoyed immense success on Wall Street, now finds itself at the centre of what is being described as the worst IT outage the world has seen.
Known for its AI-enabled cyber protection, the company has faced a dramatic turn of events following a software update that caused widespread disruption.
In 2024, CrowdStrike’s share price surged by 96%, positioning it as one of the top-performing stocks on the Nasdaq and the S&P 500. By Thursday night, the company was valued at $84 billion, making it a favourite among investors. The excitement around CrowdStrike was fuelled by its comprehensive ‘endpoint’ protection services, enhanced by AI capabilities. These services, which protect devices such as computers, laptops, and servers, have become increasingly essential in a digital world.
CrowdStrike’s popularity stemmed from its significant market share, holding 24% of the endpoint protection market. The company also benefited from the migration of data and IT services to the cloud, which has heightened demand for cybersecurity solutions. New regulations from the Securities & Exchange Commission requiring public companies to disclose cybersecurity incidents further boosted the company’s prospects. As a result, CrowdStrike was trading at a high valuation, reflecting investor confidence in its future.
The Man Behind CrowdStrike
George Kurtz, CrowdStrike’s president and CEO, has been instrumental in the company’s rise. A qualified accountant, Kurtz founded the anti-virus software company Foundstone in 1999, which he sold to McAfee in 2004. Disillusioned with McAfee’s approach to evolving cyber threats, Kurtz left to create a cloud-based endpoint protection service, leading to the birth of CrowdStrike. His vision and leadership have been pivotal in the company’s success.
High-Profile Incidents
CrowdStrike gained significant attention in 2016 when it revealed attempts by Russian intelligence groups to hack various US government entities and the Democratic National Committee. This exposure of election interference brought the company into the spotlight, attracting investments from major backers, including Google. When CrowdStrike went public in 2019, it was valued at $11 billion, further cementing its reputation in the cybersecurity industry.
Handling the Crisis
The recent IT outage, however, has put CrowdStrike’s reputation to the test. A software update intended to enhance security caused devices to display the “blue screen of death” due to a bug in the code. Looking visibly exhausted, Kurtz apologised to customers, stating, “We’re deeply sorry. That update had a software bug in it and caused an issue with the Microsoft operating system. We identified this very quickly and remediated the issue.”
Strained Relations with Microsoft
CrowdStrike’s relationship with Microsoft has been tense. Kurtz has publicly criticised Microsoft’s cybersecurity approach, claiming CrowdStrike often outperforms it. This rivalry intensified after the US Cyber Safety Review Board criticised Microsoft for failing to prevent a 2023 cyber attack on its cloud service. CrowdStrike responded by launching Falcon for Defender, a service aimed at addressing gaps in Microsoft’s Defender service.
Investor Confidence
Despite the crisis, some of CrowdStrike’s biggest supporters remain optimistic. Dan Ives, managing director at Wedbush Securities, noted, “CrowdStrike has a strong brand and global marketing presence which will need to go into next gear over the coming weeks and months to curtail some damage from this. Today CrowdStrike has become a household name but not in a good way and this will take time to settle down but does not change our positive long-term view of CrowdStrike or the cybersecurity sector.”
Future Implications
The outage is expected to have significant long-term repercussions. JD Vance, Donald Trump’s nominee for vice president, has criticised the concentration of power among a few big tech companies, suggesting that the incident will fuel further scrutiny and debate. Microsoft, in particular, may find itself under increased pressure from regulators and politicians.
As CrowdStrike navigates this crisis, its ability to recover and maintain investor confidence will be crucial in determining its future trajectory.
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