Early Vendor Reactions from the OCT24 TSIS  

CrowdStrike, Zscaler, ServiceNow, and Okta

Doug Bruehl | ETR Research & Analytics  

| September 27, 2024

As ETR community members continue to submit their updated 2024 spending intentions plans into our OCT24 TSIS survey, we stop to analyze preliminary data trends on a few key vendors. This week, we take a closer look at CrowdStrike, Zscaler, ServiceNow, and Okta. To view the full spending intentions data and analysis, contact our service team for access to the ETR research platform.  

Key Takeaways:

• CrowdStrike’s spending intentions Net Score plummeted 40 percentage points since our last survey in July, with record Decrease and Replace indications (hinted at by our two previous flash surveys)

• Indications among Global 2000 firms remain very strong at >50% for both Zscaler and ServiceNow, possibly pointing to conservatism in full-year growth guidance

• Okta is seeing continued improvement in our data set among larger customers following softer-than-expected cRPO growth guidance for this quarter

CrowdStrike: The Data is Echoing Our Worrisome Flash Surveys

CrowdStrike’s preliminary OCT24 TSIS data is now available on our research platform and compiling daily, though we estimate more than two-thirds of total responses have been received. While not finalized, spending intentions are falling sharply. On the company’s first earnings call since the outage in July, management cut FY25 sales guidance to 27.5% y/y growth vs. 30.7% last quarter at the midpoints. We recognize management’s proactive approach to repairing the situation, as shown by the announced customer commitment package, which is estimated to impact sales by $60M. However, with the notable amount of our survey respondents indicating plans to Replace the platform, we see elevated churn (gross retention rate has sat around 2% historically) as a friction point to achieving this revised growth guidance and long-term targets. Our OCT24 TSIS Replacement figure is consistent with our CrowdStrike One Month Flash Survey, in which 11% of ITDMs indicated they were very likely or certain to replace the platform (a few percentage points lower than our initial flash survey that was conducted on the day of the outage). If you would like to review all of ETR's current data on CrowdStrike, please reach out to our service team at service@etr.ai. 

Zscaler and ServiceNow: Guidance Too Conservative?

Generally speaking, software management largely spoke of enterprise software budgets remaining under pressure in the quarter due to macro uncertainty. Since the end of 2021, this challenge has led to faster top line deceleration for many high growth software companies. Among those with the highest Net Scores (>50%) from our OCT24 preliminary data, only Zscaler and ServiceNow have seen s/s and y/y Net Score improvements among Global 2000 enterprise customers (minimum N = 30).

 

Zscaler (data visualization below) recently released FQ4 results, with solid beats to sales and billings, but FY25 billings guidance of 19-20% fell short of investor expectations. However, the company executed above its initial billings guidance in FY24 comfortably (29% actual vs. 24-26% initial guidance), and the ETR data points to further improvement among G2000 organizations spending intent. With this in mind, we believe these initial growth expectations could be very conservative, with plenty of room for upside in FY25.

Meanwhile, ServiceNow’s beat-and-raise 2Q print was better received, with its cRPO beat and full year subscription revenue guidance in-line with consensus. Monetization of GenAI appears to be contributing to this outperformance, with management noting that net new GenAI ACV doubled q/q. Following a slight fluctuation in negative intentions in the second half of last year, the company’s Net Score among G2000 customers has remained stable above 50% this year.

 

For ServiceNow's most recent data set, we also note a slow but steady increase in Pervasion among this customer demographic cut while many enterprises are consolidating or eliminating software vendors due to spending constraints. Considering the stable spending intentions in our preliminary OCT24 data and reported traction with AI monetization (no small feat, as these products are pushed to markets with opaque strategies), we are watching for growth upside relative to guidance in the back quarters of the year.

Okta: Rebounding Net Score Skews to Large Enterprises

The spending intentions for this leading Identity Security vendor is rebounding for the second consecutive quarter, now sitting at an impressive Net Score of 42.5%, driven by lower negativity, while Adoption indications are more in-line with historic levels (data visualization below). This comes as the company’s 9% cRPO growth guidance for the current quarter was not received well in its latest earnings, with the stock trading down nearly 20% the following day. Management also noted some pressure on NRR (down one point incrementally to 110%), which they expect to continue into the back half of the year.

 

Okta further clarified that ongoing weakness in NRR came primarily from SMB customers, with large enterprise NRR above the total average. Our preliminary OCT24 data reflects this, with Small and Midsize respondents six points below the total Net Score and Large organizations nearly five points above. However, this nets to the third-highest Net Score among publicly traded, pureplay security vendors while the company trades at a sub-5x EV/Sales multiple, well below its comparable InfoSec peers. If you would like to review all of ETR's current data on Okta, please contact us at service@etr.ai or access the full research platform for yourself.

Enterprise Technology Research (ETR) is a technology market research firm that leverages proprietary data from our targeted IT decision maker (ITDM) community to provide actionable insights about spending intentions and industry trends. Since 2010, we have worked diligently at achieving one goal: eliminating the need for opinions in enterprise research, which are often formed from incomplete, biased, and statistically insignificant data. Our community of ITDMs represents $1+ trillion in annual IT spend and is positioned to provide best-in-class customer/evaluator perspectives. ETR’s proprietary data and insights from this community empower institutional investors, technology companies, and ITDMs to navigate the complex enterprise technology landscape amid an expanding marketplace. Discover what ETR can do for you at www.etr.ai