Investing.com -- S&P Global Ratings has revised its outlook for CrowdStrike Holdings (NASDAQ: CRWD ) Inc. to positive from stable, citing the company’s strong operating performance. The ’BB+’ issuer credit rating has been affirmed, and the issue level rating on its $750 million notes has been raised to ’BB+’ from ’BB’. The recovery rating has also been revised to ’4’ from ’5’.

CrowdStrike, a leader in technology within its core end point security products and cloud security, has shown significant resilience and revenue growth, surpassing industry averages despite challenges related to an outage in 2024. The company’s annual recurring revenue (ARR) is projected to reach $5 billion in the next year, with free cash flow expected to exceed $1 billion annually.

The positive outlook reflects S&P’s expectation that CrowdStrike will continue to generate revenue, EBITDA, and free cash flow growth above industry averages. The company’s platform adoption is expected to remain strong, and its ARR is projected to surpass $5 billion within the next year.

CrowdStrike’s 2025 revenues have exceeded S&P’s prior base-case assumptions, improving revenue and free cash flow projections for the next 2-3 years. The company has seen notable increases in module adoption and growth in emerging offerings, demonstrating effective management and execution.

CrowdStrike is also viewed as a key beneficiary of generative AI proliferation within security. The company has extended its lead in endpoint security with strong adoption of Charlotte AI, its generative AI security analyst. The company’s suite has helped improve adoption of the Falcon platform, with Charlotte AI included in more than 100 customer deals during its latest quarter.

The company’s Next-Gen SIEM business, enabled by its threat intelligence collection practices, grew more than 115% year-over-year to $330 million in ARR at the end of fiscal 2025.

Despite unknown costs related to the software update outage, CrowdStrike is believed to have a significant cushion at the current rating to address any incident-related costs. The company has a significant net cash position, increasing revenue and EBITDA scale, and annual free cash flow above $1 billion.

Given the rapidly changing competitive landscape and CrowdStrike’s focus on growth, S&P incorporates some headroom at the rating to account for potential M&A activity. If current performance trends continue, the company is well set up for a potential upgrade over the next 6-12 months.

S&P Global Ratings would consider lowering its rating on CrowdStrike if the company’s financial policy became more aggressive to support greater shareholder returns or engage in large acquisitions, or if it sustained S&P Global Ratings-adjusted leverage exceeding the 2x area. An upgrade to ‘BBB-’ over the next 6-12 months would be considered if the company continued to increase revenue and EBITDA at scale and maintained S&P Global Ratings-adjusted leverage of less than 2x.

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