CrowdStrike stock tumbles after update triggers global IT chaos

Updated at 10:56 AM EDT

CrowdStrike Holdings shares fell sharply lower in early Friday trading after an update to the cybersecurity group's threat-monitoring software was linked to one of the biggest global IT disruptions on record.

CrowdStrike ( CRWD ) said it has deployed a fix for the update to its 'Falcon Sensor' software, which affected Microsoft ( MSFT ) Windows systems around the world, but insisted that it wasn't linked to a "security incident or cyberattack".

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The update error effectively placed hundreds of millions of computers around the world in an endless 'update' loop that left them stuck on a recovery page with only a 'Blue Screen of Death' on display.

Crowdstrike CEO goes into damage control after IT crisis

"CrowdStrike is actively working with customers impacted by a defect found in a single content update for Windows hosts." CEO George Kurtz said in a statement. "Our team is fully mobilized to ensure the security and stability of CrowdStrike customers".

"Some systems are going to take more time; could be hours, could be a bit longer, but we're working with customers that if the system doesn't fully recover, we're working with them on this specific fix for that," Kurtz told CNBC's Jim Cramer. "So, essentially, we are providing guidance through our tech support, through our blogs, everything that we know we want to be as transparent as we can and get that out to our customers."

Disruptions from the update error, as well as a separate issue with Microsoft's Azure cloud services, were reported dozens of countries around the world, affecting industries from travel, healthcare, finance and media.

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The direct connection to CrowdStrike, however, is likely to have a significant impact on its second half financials, and could alter the group's earlier forecast of full-year revenues in the range of $3.97 billion and $4.03 billion, which it issued last month following a solid set of first quarter earnings.

The group's Falcon platform, which triggered the global disruption, was described by Kurtz last month as creating a "wide competitive moat and uniquely enables to solve the industry’s biggest cybersecurity, IT and data problems."

"Customers of all sizes are standardizing on the Falcon platform to achieve better security outcomes and lower their (total cost of ownership," he added.

CrowdStrike' annual recurring revenue was pegged at $3.65 billion at the close of its fiscal first quarter, which ended on April 30, while sales for that three month period rose 33% from last year to $921 million.

"Today CrowdStrike becomes 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 cyber security sector," said Wedbush analysts Dan Ives, who called the event a "major black eye" for the group.

"It could create opportunity for some competitive displacements but this will take time to determine the path of CIOs and companies looking ahead and related legal actions related to this outage," he added.

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Goldman Sachs analyst Gabriela Borges, however, reiterated her 'buy' rating and $400 price target for the group, noting she expects to see "minimal share shifts in endpoint as a result of the incident, although we expect to see noise in competitor go to market processes".

CrowdStrike shares, which were added to the S&P 500 on June 24, were marked 8.85% lower in early trading at $313.15 each, a move that would trim the stock's 2024 gain to around 24%.

Rivals Palo Alto Networks ( PANW ) and SentinelOne ( S ) were trading higher, rising 1.6% and 3.8% respectively, while Microsoft slipped 0.3% to $439.45 each..

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