 Hello, everyone, and welcome to theCUBE's day one coverage of CrowdStrike Falcon 23 Live from Caesars Palace in Las Vegas. Lisa Martin here with Dave Vellante. Dave, we got to go to the keynote this morning. It was action packed, a lot of news, some great demos, but I want to start, before we dig into that, you did a great breaking analysis on CrowdStrike. Check out siliconangle.com. You'll find it on the homepage. Give us the lay of the land in terms of the state of the business, a lot of growth, George Kurtz has pumped, we know that, what's your take? It's pumped as he gets, he's kind of a subdued dude as far as CEOs go, but let's see. So CrowdStrike, obviously a very successful company, just for those of you who don't know, $3 billion in revenue, $40 billion of market cap, they're growing with about 37% a year. If you go to their website, they have a little snapshot of their subscription customers, free cash flow, I think it's 63% of their revenue to go into free cash flow, which is, sorry, free cash flow, rule of 40. So in other words, if you take your free cash flow margin and your growth rate, add them up, you want to be at 40, they're at 63. Wow. Yeah, so rule of 40 is, from a free cash flow standpoint, it's very, very good, they're at 63. They started out at Endpoint with a single module, their whole claim to fame is they have this single lightweight agent, they also do agent lists, and it collects the data once, uses it multiple times, and then over the years they've built up many, many, many modules from surveillance and threat detection and response and on and on and on. And they're now up to, I think, 23. They announced at Black Hat, Charlotte AI, which is a large language model, generative AI assistant, SOC assistant. They demoed it on stage today, it was quite an impressive demo, I think you'd agree. And they said they were going to expose pricing at Falcon, but it was more call for pricing. Yeah, it was, yeah. They kind of really didn't expose much. But, so that's the high level. I think a couple things, the spending momentum overall, based on the ETR data for security, has been down, been compressed this year, even though security has performed better than most sectors. But even if you look at last spring, last May, it kind of dipped. And the big leaders, Zscaler, CrowdStrike, Palo Alto Networks, Okta as well, even though Okta had some other challenges with the Auth0 acquisition, they all sort of dipped, but they've come back very nicely. And so the spending climate, still tight. The macro, you know, long sales cycles, a lot of scrutiny, but platform players like CrowdStrike are playing the consolidation game. As is Palo Alto, and maybe to a lesser extent Zscaler, but they're consolidating existing tools, and that's a winning formula in the marketplace. And the last thing I'll say is competition. George Kurtz called out, and I'm going to ask him about this, he called out Microsoft on the stage today. Many times. A lot of jokes about Microsoft with security problems. Called out Sentinel-1 through a little fud in the mix with Sentinel-1 getting supposedly rumors they're going to get acquired by private equity. He said, you know, we've seen this movie before. Do you really want to invest in them? He also called out Wiz, very hot company. We saw them at RSA. Unfortunately, you got sick at RSAs. You couldn't make it, but we went to the parties and Wiz, the party was out the back door. Really? It's a very hot company. And they're known for having a great user interface, great container protection. But he called them out as a competitive win. CrowdStrike has a much more robust platform and has built some partnerships to sort of address that gap. And they also called out Arctic Wolf Networks, which is kind of an SMB specialist in MSSB. CrowdStrike's doing a lot of partnerships there with folks like Dell and PAX 8. So a lot going on, a lot of momentum in the business, but I still have some concerns about the macro. There's a lot of headwinds out there, a lot of spending concerns, soft landing, is that even a reality? And that'll weigh on, I think, people's minds and investors' minds, because the stock's pretty rich. It is, definitely. Did you hear, you talked about the consolidation plan, you wrote about that in your breaking analysis, that was one of the things you were expected to hear. You mentioned also the pricing and what was announced this morning, wasn't really an announcement, you talked about it will vary by customer by customer. Yeah, it didn't expose anything. No, nothing there. Did anything surprise you in the keynote that, like that, for example, that you didn't hear that you thought customers are going to be clamoring for this? Because the demo was impressive. I mean, it was a really excellent demo. I don't know how real it was. I doubt they were using actual real-time data, but I'm going to ask as to whether or not they are. And so, but even so, it was, I believe it was a real demo. In other words, that was pre-recorded, that's based on, I'm assuming pre-recorded, based on some live data. And the responses seemed very accurate, very timely. That would surprise me if Gen AI actually works that precisely, that quickly. We've seen it with chatGPT how fast it is, but it always requires some fine tuning. It's like Google search in the early days. This plus that, plus this, put some quotes in there. You kind of got to shape it, prompt engineer it. There wasn't a lot of prompt engineering going on there. You know, it was a demo, so in a keynote, you don't want to waste the audience's time, so you want to demonstrate the outcome, which I presume is what that was. But that was disappointed that we didn't hear more on the pricing. I thought for a minute they were going to say, hey, for a period of time we're giving it away, and just to see what adoption looks like, and then over time start charging for it. Well you've got George Kurtz on the cube, and what, about a couple hours, are you going to ask him about that? A hundred percent, absolutely. What are some of the things top of mind for you to really unpack from his mind? So, I want to understand what the pricing strategy is. You know, they sort of promised that. Definitely want to talk about M&A, you walk around this exhibit hall. I don't know, I've probably met, I don't know, 10 companies that CrowdStrike has invested in, so I kind of want to understand their investment strategy. You know, some of the announcements, Falcon for IT, I thought that was pretty cool, where they're basically helping IT clean up some of their mess. My laptop's running slowly, why is that? Yeah. You know, a lot of stuff, a lot of assets, they purchased, they made an acquisition today of a company called Bionic. Bionic, great. Originally an Israeli company, they moved to Palo Alto, but they're basically security posture management. Supposedly paid $350 million for them as reported by TechCrunch. Falcon Foundry, I thought was interesting, where you can essentially create unlimited number of sort of response workloads. George said, hey, we have an infinite number of modules. I was like, how are you going to get an infinite number of modules? And well, sure enough, this Falcon Foundry to create bespoke workloads. So I want to ask him about that. I just want to get his take on partnerships. Remember, two quarters ago, I think, two quarters ago, they had a bump in the road with small business. They've done a deal with Dell, which presumably should help shore that up, but these deals take a while to get traction. So I want to ask him about that. And maybe poke at that consolidator play a little bit to see how that's working. Yeah, I'm curious too, in the years you've been following CrowdStrike, this is our second year of covering Falcon. How do you see CrowdStrike as really redefining modern security? So I think the big thing, the other thing I want to talk to George about is the TAM expansion, the way they've added modules, added new capabilities, done it with the same agent, and now starting to touch on adjacencies like observability. So I want to understand that a little bit, but I don't think CrowdStrike's going to become an observability company, but they'll play in that space. So those are TAM expanders, which is very important. That's a big part of a CEO's job. She or he has to keep thinking about and driving new capabilities that expand the TAM, new product capabilities, whether that's through M&A or organic invention. What are some of the magic ingredients you think that CrowdStrike has? I was telling you when I got to the airport last night, there were some ads for Sentinel-1 that played on the word crowd, like don't be lost in the crowd if the thought was funny. I also thought it was unique on their website. We talked with their CMO earlier this morning, JJ, and I said, it's very rare to see competitive intelligence information published on a website. Normally, that's the competitive Intel team with a marketing or with a product that uses that for customer conversations. And she talked about really wanting to be focused on educating their prospects and their customers, how they're different versus saying, we're better and this is why. I just thought that was a really interesting approach, but do you see any sort of magic ingredients that's making them as successful as they are? Compared to the crowded pool? Yeah, I think there are several. I mean, I think first of all, it starts with the architecture, this whole idea of we have a single agent, collect once, use many, many times. I think the second thing is this company, and I actually found a chart in their investor deck, self-serving, but I used it because I thought it was good. It says CrowdStrike at the forefront of AI-led innovation, but basically it went back to 2011 and said, these are all the areas in which we've used AI. Now, AI and security have always been strong bedfellows. I mean, you'll get the same sort of story from a company like Palo Alto, another platform company, but I do think their expertise in AI, so the architecture, their expertise in AI, part of their architecture is this idea of a data graph, again, something in security. Data graphs, knowledge graphs, graph database are very expressive, so you can visualize things in 3D, and security's so complex, sometimes that's a super helpful thing to do. I also think that their M&A has been outstanding. They haven't done like these big, giant massive acquisitions. They've done these really interesting tuck-ins. They're very active in the venture community, so they get good visibility on the leading trends, and I also think the last thing is they go to market. I think they're a really strong go-to-market, go-to-market story. I think the one weakness I saw last year was the ecosystem, and it's clearly starting to grow. I mean, I think the ascendancy of an ecosystem tends to come after the ascendancy of a company, but we see it with Snowflake. They're sort of doing it, ratcheting it up together. I think CrowdStrike still has some work to do there, but they've made some great progress from just in a year in terms of the amount of activity here of really high-quality partners. I think Jay-Jee was saying it's over 2X growth from last year when you guys were here about 30. Yeah, like they said, 30 last year. It was actually really small last year. I think we were at the Aria, it's kind of a quiet show. This show's buzzing. It is buzzing. So it's doubled the number of attendees, and I think more than double the number of exhibitors, so that's a good sign. You like to see that. I think the next thing is, I'd be curious to see whether the GSIs jump in, you know, the global system integrators. That's usually another sign. You know, you see it, you certainly saw it. We saw it at service now. You see it, maybe to a lesser extent, but you definitely see it at UiPath. RPA's kind of a heavier lift, but security's a pretty heavy lift, too. Yeah, it definitely is. He mentioned their strong posture in M&A. How good are they on the integration side? Because it's always a challenge for organizations across industries, is actually integrating different technologies so that it's a win-win for the customer. You know, I think containers and microservices and cloud have made it easier from a technology standpoint to do those types of integrations, and I think CrowdStrike has done a very, very good job of that, probably, I don't know, I have to talk to their product people, but my guess is they've done a very good job of selectively choosing companies with an architecture that can fit nicely into theirs. So that's very important to check that technical box, but I also think that culturally it's very important as well. I talked about OCTA's acquisition of OZERO before. That's an example of a great acquisition on paper. I was very high on it, because OCTA had the enterprise locked up, OZERO had the developers, but they just never could figure out the integration, the culture, the go-to-market. There was a brain drain at OCTA after that acquisition, caused a lot of pain and anguish. I think they'll be fine to get through it, but it was a real bump in the road. Definitely hurt their momentum. And so that's an example where we've seen so many historically in this industry where it just kind of didn't work out, or it was just a forced marriage. I think CrowdStrike with smaller acquisitions like this one, a Bionic was 350 million, that's not really a big acquisition by today's terms. We're seeing Databricks and Snowflake do a lot of these little tuck-in acquisitions, which I think make a lot of sense. And so I think that's some of the reasons why I think they're good at it. I think they've got a good M&A team. I think George really understands this business well. He's been deep in it for a long, long time. It's kind of a visionary, even though he's very low-key, he's a dock connector. So you're going to talk to him, he's on at 4PM Pacific today with Dave. You're going to talk to him about the pricing structure. What are some of the other things that you want to unpack with George? I do know to your point about the competition. He said in the earnings call, was it the earnings call or maybe it was the Goldman Sachs? Communicopia, whatever they call it, conference. He talked about a lot of Microsoft accounts. Microsoft's their biggest competitor. Microsoft's got a big security business. They're easy to do business with. They're everywhere, and they're a pain to companies like CrowdStrike because it's easy for a customer to say, yeah, sure, I'll take the Microsoft security. So very, very high overlap, I was saying before, 70, 80% overlap. In other words, if you look at the CrowdStrike accounts, well over half have Microsoft tools. And so CrowdStrike has to demonstrate that it's got better product, and it does. I think there's, you know, a lot of times it's not hard to compete with Microsoft on the quality of product. What's hard to compete with is they got one of everything and they make it really easy to do business with and they're really good at packaging and pricing and delivering eventually and then they have Azure as a cloud, so it's very difficult to compete with them. You know, unlike AWS where they're a good competitor but they're much more open to partnering. Not that Microsoft doesn't partner, they do, but they love to compete head to head, which they do with CrowdStrike. They compete in identity with Octa. They compete in cloud security and network security with Zscaler. They've announced products there. It was interesting to see all those stocks dropped when Microsoft made the announcement I had said I did a break analysis as a buying opportunity, I think it turned out to be just that with those leaders. Yeah, but it's still Microsoft, you can't ignore them. No, no. I think, you mentioned the word momentum and I think that's something that I'm feeling as soon as I walked in this morning, you could feel that. You were here last night? Yeah. It was at the partner conference? I wasn't at the partner conference, but this hall opened, I want to say at five o'clock. It was jammed, it was buzzing. Next year I want to record, you know, kind of like we do theCUBE after dark at Dell Tech World, you know, we do that. I want to do that here next year because it's such good action. We can grab practitioners. It was all red lanyards, you know, that are the customer lanyards. There's over 2,000 customers here. And they like to talk, some of the partners I talked to. I said to GSIs, I had a great conversation with Deloitte last night, they're coming on here and a lot of the ecosystem, so theCUBE after dark day one next year at CrowdStrike Falcon is a definite going to make that happen. I love it, sign me up. Well, I'm looking forward to the rest of today. I'm looking forward to your interview with George. We've had some customers on today, we've had some practitioners, some of their execs are coming on and really kind of double click on the strategy, the vision and how they really are, really kind of leading this inflection point in the industry. So we've got another half day today, Dave, and we've got all day tomorrow to unpack. We've got great guests. The financial analyst event tomorrow at 11 o'clock, unfortunately, I won't be able to attend because we'll be doing CUBE interviews, but that'll be good. A bunch of the financial analysts are coming out. They'd be fools not to come out, CrowdStrike makes them come out to Vegas. A lot are in California, but a lot of the East Coast guys in New York, I believe are going to be flying out here. I know I've talked to a couple of folks. I know the Barclays guys are going to be here and some others, and they do a really good job of covering this company. So we'll see how they buy the story. We saw this at Snowflake, the stock rose, the day of the financial analyst event. We'll see what the action is tomorrow in the market. Excellent, and keep it right here for action speaking of action. Lisa Martin and Dave Vellante live day one of our coverage of CrowdStrike Falcon. We have great conversations coming up next again four p.m. Pacific time today. George Kurtz is on with Dave. We're going to be here all day tomorrow. We're going to unpack tomorrow's keynote as well. We thank you so much for watching theCUBE and remind you all of our content on demand at theCUBE.net. All of our editorial is on siliconangle.com. So check it out. We'll see you in a few minutes with our next guest.