Key insights
- CrowdStrike (CRWD) announced a forward stock split, a move often associated with strong operational performance and investor enthusiasm. While stock splits themselves don't alter a company's fundamental value, they can attract retail investors and signal confidence. CrowdStrike's significant post-IPO gains suggest underlying business strength, potentially providing a positive sentiment boost to the tech and cybersecurity sectors.
Although artificial intelligence (AI) has been Wall Street's hottest trend for years, it's not the only catalyst responsible for lifting the broader market. Stock-split euphoria has also been pivotal in sending the stock market to new heights.
Several high-profile companies have completed or announced forward stock splits in 2026, including online travel site Booking Holdings, which effected a 25-for-1 split, and online used-car retailer Carvana, which enacted a 5-for-1 split. But it's the newest stock-split stock that may draw the most attention of the bunch: AI-driven cybersecurity company CrowdStrike Holdings (CRWD 6.72%).
A stock split allows a publicly traded company to superficially alter its share price and outstanding share count. These adjustments are superficial in the sense that they don't affect a company's market cap or its underlying operating performance.
Stock splits come in two varieties, forward and reverse, and are viewed quite differently by investors. Reverse splits, which increase a company's share price, are often implemented by struggling companies that are attempting to avoid delisting from a major stock exchange. Though Booking Holdings shone brightly after a reverse split in June 2003, it's a rare exception to the rule.
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Comparatively, investors flock to companies announcing forward stock splits. If a company has to announce a forward split to make its shares more nominally affordable for retail investors, there's a good likelihood that its operations are firing on all cylinders.
With most brokers allowing customers to buy fractional shares, there isn't as much urgency to conduct forward splits as there was 10 years ago. Nevertheless, CrowdStrike shares hovering around $750 -- a gain of nearly 1,200% since its initial public offering (IPO) in June 2019 -- provided the impetus for the company's board to declare a 4-for-1 split. This split will officially go into effect after the close of trading on July 1.
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In several respects, CrowdStrike fits the mold of a company that's firing on all cylinders.
From a macro standpoint, cybersecurity solutions have evolved into something that's no longer optional. The company's AI-driven Falcon platform is quicker and nimbler than on-premises security solutions at detecting and responding to potential threats. No matter how well or poorly the U.S. economy is performing, hackers don't take a vacation, which is great news for CrowdStrike.
This is also a relatively asset-light operating model. Subscription software-as-a-service leads to high retention rates and an adjusted subscription gross margin that typically hovers in the low-80% range.
Staggering growth.CrowdStrike has now grown revenue at more than a 50% CAGR over the last decade.$CRWD pic.twitter.com/4I1UcFqzUA
Furthermore, CrowdStrike has mastered the high-margin add-on sale. Even though its cybersecurity solutions aren't the cheapest, more than 50% of its customers have purchased at least six different cloud modules, with a quarter of its customers deploying eight or more. These add-on sales have fueled CrowdStrike's double-digit sales growth.
Yet in spite of these well-defined competitive advantages, the short-term outlook for CrowdStrike is probably dicey at best. History shows that no company at the forefront of a game-changing trend (e.g., AI) has ever been able to sustain a price-to-sales (P/S) ratio above 30. CrowdStrike's P/S ratio before its fiscal first-quarter earnings release was nearly 40!
While Wall Street's next blockbuster stock split is bound to garner attention, investors would be wise to keep their expectations in check.