CrowdStrike shares drop after Delta seeks compensation

Shares of CrowdStrike fell over 4% in premarket trading on Tuesday following reports that Delta Air Lines will seek compensation from the cybersecurity firm for a global IT outage that severely disrupted industries, including airlines. The outage on 19 July resulted in more than 2,200 flight cancellations, with Delta having to cancel over 6,000 flights to date.

The issue was traced back to CrowdStrike’s ‘Falcon Sensor’ software, which caused Microsoft Windows to crash with the infamous ‘Blue Screen of Death.’ According to CNBC, Delta has retained a law firm and plans to seek compensation from both CrowdStrike and Microsoft.

The outage has significantly impacted CrowdStrike’s stock, which had more than doubled in 2023 but has since fallen over 24%, resulting in a market valuation loss of more than $20 billion. A survey by Evercore ISI revealed that many clients are considering reducing or pausing their spending on CrowdStrike and expect monetary relief, such as discounts or service credits, from the company.

Analysts at Needham highlighted that the outage has damaged customer confidence, with many expressing frustration over the disruption, especially during a peak travel and shopping period. The analysts noted that clients are now wary of relying too heavily on single platforms due to the associated concentration risks.