CrowdStrike Holdings Inc. (NASDAQ:CRWD)

The analysis reveals a concerning trend in economic profit over the observed period. While net operating profit after taxes (NOPAT) demonstrates substantial growth initially, economic profit declines significantly, ultimately becoming substantially negative. This suggests that despite increasing operational profitability, the returns generated are insufficient to cover the cost of capital employed.

Net Operating Profit After Taxes (NOPAT)

NOPAT experienced significant growth from 2020 to 2023, increasing from US$139,090 thousand to US$625,859 thousand. However, a decrease is observed in 2024 and a more pronounced decline in 2025, falling to US$516,439 thousand. This suggests a potential slowdown in operational performance in the later years.

Cost of Capital

The cost of capital remains relatively stable throughout the period, fluctuating between 18.96% and 19.27%. This indicates that the company’s financing costs have not been a primary driver of the observed changes in economic profit. The slight variations observed do not appear to correlate directly with the shifts in economic profit.

Invested Capital

Invested capital exhibits a consistent and substantial increase throughout the period, rising from US$669,497 thousand in 2020 to US$7,614,215 thousand in 2025. This rapid expansion in capital employed appears to be the primary contributor to the declining economic profit, as the growth in NOPAT has not kept pace with the increase in capital investment.

Economic Profit

Economic profit begins at US$10,075 thousand in 2020, indicating value creation. However, it quickly turns negative, reaching -US$234,974 thousand in 2021. The negative economic profit continues to worsen in subsequent years, culminating in a substantial loss of -US$945,450 thousand in 2025. This consistent decline signifies a growing disparity between the returns generated and the cost of capital, indicating a destruction of shareholder value. The magnitude of the negative economic profit in 2025 is particularly noteworthy.

In summary, the company demonstrates increasing operational profitability as measured by NOPAT, but this is overshadowed by a rapidly expanding capital base and a relatively stable cost of capital. The resulting economic profit trend indicates a significant and worsening shortfall in returns relative to the cost of capital, suggesting a need to evaluate capital allocation strategies and operational efficiency to improve value creation.

Net Income (Loss) Attributable to CrowdStrike

The net income figures demonstrate significant variability over the periods. Starting with a net loss of approximately $141.8 million in the year ending January 2020, the loss decreased to about $92.6 million in January 2021. However, this was followed by an increased loss to roughly $234.8 million in January 2022. Thereafter, the loss narrowed to $183.2 million in 2023. Notably, in 2024, there was a reversal to a positive net income of $89.3 million, indicating a substantial recovery. In the following year, 2025, the figure returned to a loss, though much smaller than previous years, at approximately $19.3 million.

Net Operating Profit After Taxes (NOPAT)

The NOPAT values exhibit a consistent and strong upward trend over the years observed. Starting at $139.1 million in 2020, there was a steep increase to $246.0 million in 2021. The upward momentum continued in 2022 with $389.9 million, then sharply increased to $625.9 million in 2023. In 2024, NOPAT further grew to $690.7 million before experiencing a decline to $516.4 million in 2025. Despite the decrease in the final year, the overall trend across the period indicates strong growth in operational profitability after taxes.

Summary of Trends and Insights

The financial data reveals a divergence between net income and NOPAT trends. While net income shows volatility with alternating losses and positive results, NOPAT consistently increased until 2024 before slightly declining in 2025. This suggests that operational efficiency and profitability improvements were achieved, but other factors such as non-operating expenses, taxes, or one-time items might have adversely impacted the net income figures. The significant positive net income in 2024 stands out as an anomaly compared to other years with net losses. The decreasing net loss in 2025 alongside a decline in NOPAT might indicate emerging challenges or increased costs affecting overall profitability despite strong operational earnings.

Provision for Income Taxes

The provision for income taxes shows significant fluctuation over the observed periods. From 2020 to 2021, there is a noticeable increase from approximately 2 million to nearly 4.8 million US dollars. This upward trend continues sharply into 2022, reaching over 72 million US dollars. However, in 2023, the provision declines substantially to around 22 million US dollars before increasing again in the subsequent years, rising to about 32 million and then further to approximately 71 million US dollars by 2025. This pattern indicates periods of considerable variability in tax provisioning, suggesting changes in taxable income or adjustments in tax strategy during these years.

Cash Operating Taxes

Cash operating taxes follow a somewhat similar but less volatile pattern compared to the provision for income taxes. Starting at close to 2.8 million US dollars in 2020, the cash taxes increase to around 6 million US dollars in 2021. There is a significant spike in 2022 reaching over 91 million US dollars, which is a marked increase from previous years. Following this peak, the cash tax payments decrease sharply to approximately 15.8 million US dollars in 2023, then decline further to just over 10 million in 2024, before increasing again to about 45.9 million US dollars in 2025. The fluctuations in cash taxes suggest variability in actual tax payments that may reflect changes in cash flows or timing differences relative to the provision for income taxes.

Comparison and Insights

Both provision for income taxes and cash operating taxes exhibit significant fluctuations, with peaks around 2022, followed by declines and then increases toward 2025. The provision generally exceeds the cash taxes in some years, particularly noticeable in 2022, indicating potential deferred tax liabilities or adjustments in tax accounting treatments. The volatile nature of both metrics implies an underlying variability in taxable income or strategic tax management, possibly linked to changes in operating performance or tax regulations during the analyzed periods.

The financial data indicates significant changes in the capital structure and equity position over the observed periods.

Total Reported Debt & Leases

The reported debt and leases showed a substantial increase from approximately $50.7 million in early 2020 to around $779.0 million in early 2021. From 2021 through 2025, the value of reported debt and leases remained relatively stable, fluctuating slightly around the $780 million mark. This suggests that after a sharp rise in debt, the company maintained a consistent level of liabilities related to debt and leases.

Total Stockholders’ Equity

Stockholders’ equity consistently increased throughout the period, starting from approximately $742.1 million at the beginning of 2020 and rising to nearly $3.28 billion by January 2025. The growth trend appears to accelerate over time, with a remarkable increase especially after 2022, indicating a significant strengthening of the company's equity base and potentially reflecting retained earnings growth, capital raises, or other equity improvements.

Invested Capital

Invested capital experienced a dramatic increase, jumping from about $669.5 million in 2020 to roughly $2.52 billion in 2021. This upward trend continued steadily, reaching over $7.61 billion by early 2025. The data reflects substantial investments and growth in company assets financed by both debt and equity over these years, underscoring rapid expansion or capital deployment activities.

Overall, the data reveals a period of rapid growth in invested capital accompanied by a stable level of debt and a strong expansion of stockholders’ equity. The company's capital structure appears to have shifted towards greater equity financing while maintaining a steady debt position. This trend suggests increased financial strength and capacity to support ongoing operations and growth initiatives.

The economic spread ratio exhibits a consistently declining trend over the observed period. Initially positive, the ratio transitions to negative values and demonstrates increasing negativity through the final reported year.

Economic Spread Ratio

Beginning at 1.50% in January 2020, the economic spread ratio decreased substantially to -9.31% by January 2021. A less pronounced decrease followed, moving to -7.04% in January 2022, and then to -3.76% in January 2023. The rate of decline accelerated in subsequent years, reaching -7.48% in January 2024 and further deteriorating to -12.42% in January 2025. This indicates a widening gap between the company’s return on invested capital and its cost of capital.

The economic profit mirrors the trend in the economic spread ratio, initially positive but becoming increasingly negative. This suggests that the company’s invested capital is generating returns below its cost, resulting in value destruction.

Economic Profit

Economic profit started at US$10,075 thousand in January 2020. It then experienced a significant shift to a loss of US$234,974 thousand in January 2021. Losses continued in subsequent years, with US$228,309 thousand in January 2022, US$154,738 thousand in January 2023, US$440,688 thousand in January 2024, and escalating to US$945,450 thousand in January 2025. The magnitude of the losses increased over time, aligning with the decreasing economic spread ratio.

Invested capital consistently increased throughout the period. Despite this growth in capital employed, the company’s ability to generate returns exceeding its cost of capital diminished, as evidenced by the declining economic spread ratio and increasing economic losses.

Invested Capital

Invested capital rose from US$669,497 thousand in January 2020 to US$2,524,874 thousand in January 2021. Continued growth was observed, reaching US$3,240,763 thousand in January 2022, US$4,116,318 thousand in January 2023, US$5,890,276 thousand in January 2024, and finally US$7,614,215 thousand in January 2025. The consistent increase in invested capital did not translate into improved economic profitability.

The combined trends suggest a growing inefficiency in capital allocation, where increasing investments are yielding progressively lower returns relative to their cost.

The economic profit margin demonstrates a concerning trend over the observed period. Initially positive, it has deteriorated significantly, culminating in a substantial negative margin by the final year presented. This indicates a growing disparity between the company’s economic profit and its adjusted revenue.

Economic Profit Margin Trend

The economic profit margin began at 1.32% in January 2020. It experienced a sharp decline to -19.34% in January 2021, representing a substantial shift from positive economic profit to a significant economic loss relative to revenue. A partial recovery was noted in January 2022 (-11.03%) and January 2023 (-5.05%), but this was followed by a renewed decline to -11.74% in January 2024. The most recent period, January 2025, shows a further deterioration, reaching -20.43%, the lowest point in the observed timeframe.

The consistent negative trend in economic profit, as reflected in the economic profit margin, suggests that the company’s cost of capital is not being adequately covered by its operating profits. While adjusted revenue has consistently increased throughout the period, the growth in economic profit has not kept pace, and has in fact moved strongly into negative territory. This suggests potential issues with profitability, capital allocation, or both.

Relationship to Adjusted Revenue

Despite a consistent increase in adjusted revenue from US$762,514 thousand in January 2020 to US$4,628,202 thousand in January 2025, the economic profit margin has worsened. This indicates that revenue growth alone is not translating into improved economic performance. The increasing magnitude of the negative economic profit, coupled with rising revenue, highlights a growing inefficiency in generating returns above the cost of capital.

The accelerating decline in the economic profit margin in the later years warrants further investigation. Understanding the drivers behind the increasing economic loss is crucial for assessing the company’s long-term financial health and sustainability.