CrowdStrike Holdings Inc. (CRWD) is losing a supporter on Wall Street. KeyBanc Capital Markets analyst Eric Heath has stepped back from his bullish stance, downgrading the cybersecurity giant from Overweight to Sector Weight.
The issue? Heath thinks lower cybersecurity demand in 2026 could hit CrowdStrike harder than investors expect. Despite all the AI hype floating around tech, the cybersecurity space hasn't seen meaningful AI tailwinds yet, according to his downgrade note.
What the Survey Data Shows
KeyBanc's latest CIO survey paints an interesting picture. Security remains a top priority for companies, which sounds good on the surface. But here's the catch: security budget growth is expected to trail overall IT budget growth. Add in the reality that it's too early for AI to positively impact security spending, and you've got a recipe for slower growth. The survey also suggests the runway for further consolidation in the space may be shortening.
CrowdStrike has another problem lurking. The company has higher exposure than its peers to U.S. federal cyber budgets, which are likely to stay flat in 2026, Heath noted.
"Comps in FY27 get more difficult two years post the outage and after significant Flex adoption in FY26," Heath wrote, pointing to tougher year-over-year comparisons ahead.
Shares of CrowdStrike declined 1.77% to close at $462.28 on Monday.
