Next-generation cybersecurity specialist CrowdStrike's (NASDAQ: CRWD) stock infamously plunged from its highs earlier this summer after a software update snafu crashed millions of Microsoft-linked computer systems worldwide. It was a bad look for the company and sparked concerns about losing customers to hungry competitors.

It has been a couple of months since the outage, and CrowdStrike's first earnings report since the event gave little indication that the sky was falling.

The Federal Reserve has begun cutting the rate it charges banks for overnight lending, potentially leading to interest rate cuts that will potentially invite higher valuations on growth stocks like CrowdStrike. If you haven't already, now is an opportunity to consider adding this high-flying AI stock to your portfolio while it's trading at a discount to 52-week highs.

Here is what you need to know.

There's no point in sugarcoating it: The CrowdStrike incident was a disaster. The good news is that it was an update bug, not some fatal flaw with the company's technology or product.

Its platform isn't like the antivirus software of a decade ago; the cloud-based product creates a network that links all of a client's devices in real time and protects them using various technologies, including artificial intelligence (AI).

CrowdStrike has received strong industry recognition as a leader in endpoint detection and response, and it has evolved into a diversified security platform that sells its protection as product modules. The company's tremendous growth is tied to picking up new customers and cross-selling.

Today, 65% of its customers use at least five of its modules. It adds up to big dollars; 48% of customers who are spending at least $100,000 use at least eight modules.

Cybersecurity companies like CrowdStrike spend heavily on marketing and acquiring customers, but cross-selling has helped CrowdStrike boost profits. The company converts nearly a third of its annual sales into free cash flow. It now has the deep pockets to compete with just about anyone: roughly $4 billion in cash on its balance sheet and only $743 million in debt.

Wall Street's initial fear was that customers would flee CrowdStrike after the outage, but it hasn't happened, at least not yet.

All eyes were on 2024 guidance since second-quarter earnings would be too early to see an effect from the outage. Management did drop its revenue guidance, but only by a small amount. You can see below that analysts' estimates for revenue this year have only fallen about 2.5%.

It's worth noting that software sales cycles can take time, and analysts expect headwinds will stretch into 2025. Revenue estimates for next year have fallen about 5.5%. One noteworthy headline is that archrival SentinelOne recently won a deal with PC manufacturer Lenovo to include its security software in new devices.

There is no way to know if CrowdStrike was a candidate for this business. Still, these types of headlines could raise questions until the company gets more quarters under its belt and demonstrates that its post-outage growth trajectory remains intact. Revenue guidance over the next few quarters will be crucial.

The proof is always in the data, and future results could change things. But for now, it seems CrowdStrike will survive the outage and remain a best-in-class technology growth stock. Even the reduced 2025 revenue estimates equate to a 22% gain next year.

The stock is still 25% off its high despite bouncing off its post-outage lows. That gives investors some much-needed relief on the stock's valuation:

The question with fast-growing, highly profitable businesses like CrowdStrike is always: How expensive is too expensive?

Its stock traded at roughly 24 times its enterprise value (EV) to sales at the time of the outage, making it among the highest-valued companies on Wall Street. It's hard to call CrowdStrike cheap when it's back to trading at a hefty premium to its peers, but it's no longer the market's most expensive company. It's comfortably below what companies like Nvidia and Palantir currently go for.

The stock is still expensive enough that market volatility or eventual evidence of further damage from the outage could knock it down another peg. However, interest rates are now heading lower, which could lift valuations of growth stocks like CrowdStrike Holdings.

You should consider owning some CrowdStrike shares but don't feel compelled to rush in. Consider a dollar-cost averaging strategy to keep some cash handy in case better buying opportunities arise.

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor's total average return is 757% -- a market-crushing outperformance compared to 167% for the S&P 500.*

Justin Pope has positions in SentinelOne. The Motley Fool has positions in and recommends CrowdStrike, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

1 Artificial Intelligence (AI) Growth Stock Down 25% to Buy Now was originally published by The Motley Fool