What’s next for CrowdStrike action now?

As many Americans slept last night, computer systems were down around the world, including those of major airlines and banks. Experts are calling it the “largest computer outage in history.” And the stock market’s darling CrowdStrike Holdings (NASDAQ: CRWD) is at the heart of the crisis.

CrowdStrike operates a cloud-based cybersecurity software platform. Being cloud-based, an update can be released at any time. The latest update had a “flaw.” And that flaw caused Microsoft Windows operating systems get stuck on a “blue screen of death,” unable to function properly.

Co-founder and CEO George Kurtz says CrowdStrike has already identified the problem and deployed a fix, so recovery is underway. For example, United Airlines says he is already resuming flights.

CrowdStrike is one of the hottest stocks on the market. Earlier this month, shares were up more than 50% in 2024. But as of 10:20 a.m. Friday morning, shares were down 9%. Investors rightly want to know what to expect next. And there’s definitely a lot to unpack here.

Is this an overreaction?

Investors often overreact to short-term news, losing sight of the long-term perspective. CrowdStrike and its peersA short-term problem can have long-term consequences. Businesses that sell physical products don’t typically change significantly overnight. But things can quickly go downhill over a period of time. Cloud-based software company like this.

In the risks section of its financial filings, CrowdStrike states: “Because our cloud-native security platform is complex, it may contain flaws or errors that are not detected until after deployment.” That’s exactly what happened last night.

CrowdStrike’s management says that if a default were to occur, it “could harm our reputation and have a negative impact on our business, financial condition and results of operations.” It’s a statement with enormous implications.

The good news for CrowdStrike investors is that this was not A cybersecurity issue. Kurtz was quick to emphasize the point, saying, “This is not a security incident or a cyberattack.” The bad news is that his software flaw still crippled significant sectors of the global economy for long enough to cause real problems.

What’s next for CrowdStrike action now?

Shareholders might be tempted to breathe a sigh of relief now that things are starting to pick up again. And on the one hand, it’s encouraging to see how quickly CrowdStrike was able to implement a solution. But it’s too early to leave today’s news in the rearview mirror.

The story continues

First off, air travel was severely impacted this morning and it will take time for airlines to get everyone to their destination. Thousands of travelers have had to change their plans and the cost to airlines is real and substantial. There is no way these companies will agree to foot the bill. They will wait for CrowdStrike to compensate them.

It will take time to know how much this mistake could cost…