What's Going On With CrowdStrike Shares Friday?

CrowdStrike Holdings, Inc. CRWD shares are trading lower on Friday following a report suggesting that the Department of Justice and the Securities and Exchange Commission are investigating the company’s $32 million deal with Carahsoft Technology Corp.

What To Know: The deal between CrowdStrike and Carahsoft, a technology distributor, aimed to provide cybersecurity tools to the Internal Revenue Service (IRS), according to Bloomberg. Back in 2023, Carahsoft paid CrowdStrike for the deal but the IRS never purchased the products.

CrowdStrike finalized the deal on the last day of its 2023 third-quarter. In a follow-up earnings call, CEO George Kurtz emphasized that the quarter included a significant federal government deal for identity threat protection, valued in the eight figures.

The deal is reportedly large enough that it could have impacted whether CrowdStrike met or missed Wall Street's projections for the quarter. After reporting its earnings, the company's stock rose by 10%.

CrowdStrike has not explained how it accounted for the deal, but the company stands by its accounting. In its November 2024 earnings report, it excluded $26 million from its recurring revenue, although it remains unclear if this is connected to the IRS and Carahsoft deal.

CFO Burt Podbere explained that the company deemed the transaction non-repeatable after the distributor exercised its transferability rights. Investigators have continued interviewing former CrowdStrike and IRS employees since last fall and are working to collect relevant documents.

At the time of the deal, some CrowdStrike employees raised concerns about "pre-booking" the transaction, unsure if the IRS would purchase the products. A CrowdStrike spokesperson denied these claims.

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CRWD Price Action: At the time of writing, CrowdStrike shares are trading 4.77% lower at $415.32, according to data from Benzinga Pro.

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