CrowdStrike to Allocate $60 Million in Customer Compensation Following Global Outage

Cybersecurity firm CrowdStrike has announced plans to allocate approximately $60 million in credits to customers affected by a global computer outage caused by a faulty software update in July. The company revealed this compensation strategy on Wednesday, aiming to address the disruption it triggered across various industries.

In addition to the compensation announcement, CrowdStrike has revised its earnings forecast for the year. It now expects annual revenues of about $3.9 billion, which is $86 million to $109 million below previous estimates.

The compensation figure might be on the low side. Delta Air Lines, one of the hardest-hit clients, estimates its losses at around $500 million due to canceled flights, passenger compensation, and other expenses. CrowdStrike’s contract with Delta caps its liability at under $10 million, potentially leaving a significant gap between the losses and the compensation offered.

Despite the financial hit, CrowdStrike reported a strong earnings performance for the quarter ending July 31. The company posted record adjusted earnings of $260.8 million, a 47% increase from the previous year, and ended the quarter with $4 billion in cash, up $300 million from the start of the period. Following the earnings report, CrowdStrike’s shares rose 3% in after-hours trading.

The outage, which occurred on July 19, caused widespread issues for retailers, delivery companies, hospitals, and airlines. Although CrowdStrike’s second-quarter results are expected to show a 30% increase in adjusted earnings from last year, its stock is still down more than 20% since the outage but up 33% from the recent lows.

The disruption stemmed from a flawed software update that affected systems running Microsoft programs. Delta Air Lines, in particular, struggled for nearly a week to resume normal operations due to issues with its crew tracking software, leading to significant financial losses. Delta is considering legal action against CrowdStrike and Microsoft to recover its costs.

CrowdStrike and Microsoft have defended themselves, arguing that Delta’s extended recovery was partly due to the airline’s own issues. CrowdStrike’s legal team has indicated it is prepared to contest any lawsuits, emphasizing that its liability is limited by contract.

The company reassured investors in July that it has the financial resources to manage the situation, with $3.7 billion in cash and a $750 million credit line, along with insurance policies to cover potential claims.

Looking ahead, analysts like Raj Joshi from Moody’s suggest that the full impact of the outage may not be immediately reflected in CrowdStrike’s financials. Joshi noted that it takes time for customers to switch cybersecurity providers and that future sales of additional services to existing customers might be challenging. Moody’s, which recently upgraded CrowdStrike’s credit rating, has shifted its outlook from positive to neutral, reflecting concerns about the potential long-term impact on growth and customer relations.