CrowdStrike Admits Bug Caused Massive Global IT Outages
Cybersecurity firm CrowdStrike Holdings Inc (NASDAQ:CRWD) has acknowledged that a bug in its safety mechanism caused last week's massive global IT outages.
The issue stemmed from a flawed data update that led to widespread disruptions, affecting Microsoft Corp's (NASDAQ:MSFT) Windows systems worldwide, reported Bloomberg.
This incident impacted crucial operations in airlines, banking, and stock exchanges across multiple countries.
Systems were compromised for hours, leaving bankers in Hong Kong, doctors in the U.K., and emergency responders in New Hampshire unable to access vital programs.
Microsoft stated that over 8.5 million Windows users were affected. Although fixes were deployed and many systems have been restored, the incident's scale was unprecedented.
According to CrowdStrike's preliminary post-incident review, an error in a Rapid Response Content configuration update went undetected, causing widespread crashes.
The company regularly issues these updates to enhance security measures against malicious activities based on customer policy configurations.
CrowdStrike plans to improve testing of Rapid Response Content by implementing a new check to fix the faulty Content Validator.
Also Read: Cathie Wood's Ark Invest Snaps Up $5.3M In Beaten-Down Crowdstrike Shares
Additionally, the company will adopt staggered, canary deployments to test updates incrementally before a full rollout. Customers will also have more control over the timing and location of future updates.
Following the outage, CrowdStrike's shares plummeted nearly 30%, significantly reducing its market value. The U.S. House Committee on Homeland Security has summoned CEO George Kurtz to explain how the company will prevent similar incidents in the future.
The tech outage could cost over $1 billion, but who will foot the bill remains unanswered.
Rosenblatt analyst Catharine Trebnick reiterated a Buy rating on the shares and lowered the price target by 16% from $420 to $350.
The faulty software update has led the analyst to revise the estimate for FY25 and FY26 as the analyst notes that despite the company's swift response and deployment of a fix, the incident's unprecedented scale and disruption across critical industries will undoubtedly have short-term repercussions.
The analyst sees FY25 revenue of $3.956 billion (previously $4.000 billion), EPS of $3.90 (Previously $4.03) and FY26 revenue of $4.986 billion (previously $5.016 billion), EPS of $4.75 (previously $4.92).
The shift of resources to customer support and remediation will end in delays in new customer acquisitions and elongated sales cycles, says the analyst.
The analyst expects operational expenses to rise due to remediation efforts, including seeking assistance from Deloitte to address issues with affected companies like Delta Air Lines Inc (NYSE:DAL), United Airlines Holdings Inc (NASDAQ:UAL), Marriott International Inc (NASDAQ:MAR).
Price Action: CRWD shares closed lower by 3.99% at $258.14 on Wednesday.
Read Next:
Photo via Shutterstock