'Mad Money w/ Jim Cramer 6/4/25
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This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information-packed daily market preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash market update podcast or find Schwab Market Update wherever you get your podcasts.

Hey, I'm Kramer. Welcome to Mad Money. Welcome to Kramerica. Other people are my friends. Hey, listen, I'm just trying to make a little money. My job is not just to entertain, but to explain. So call me at 1-800-743-CNBC or tweet me at Jim Kramer.

President Trump better be a much tougher negotiator than President Xi. Because right now we're so hooked on China, it's almost hard to believe. That's why it's so worrisome.

When the president posts on Truth Social about the negotiations, as if there are any real negotiations going on at all, every day I hear some companies say that it's doing its best to wean itself off China. But we depend on so much. We depend on them for manufacturing, on our goods, our raw materials, that it's just not easy. Sometimes it can't even be done.

As the president said in his true social posting, quote, I like President Xi of China always have, always will. But he is very tough and extremely hard to make a deal with. Now, with the back after that post in all caps, followed by three exclamation points.

Now, that's a serious analysis, especially for 2.17 a.m. Now, if that was the only action for today, I think that everything would look a lot worse at the close. We did dodge a bullet. Dow off 92 points, S&P advancing 0.01%, and then ASDAG gaining 0.32%. How bad is our Chinese addiction? To me, it's relentless. You know what? It's like fentanyl.

I want you to consider these dependencies. This morning, the Journal reported that our automakers are racing to find a workaround to China's stranglehold on rare earth magnets. The Journal says several traditional electric vehicle makers and their suppliers are considering shifting some auto parts manufacturing to China.

to avoid looming factory shutdowns. The journal continues, moving production to China as a way to get around the export controls on rare earth magnets could work because the restrictions only cover magnets, not finished products. China controls 90% of the world's supply of these rare earth metals that go into these magnets. Now granted, these are incredible materials.

But it's kind of crazy that we allowed our F-35 jet fighters to rely on something that China has a stranglehold on. I was shocked at this piece. It's worth reading. It's must read. This stuff is the exact opposite of what the president would like to hear.

Now, we've heard from a number of retailers that have been crushed by the tariffs. I was surprised by how quickly both Dollar General and Dollar Tree moved away from China. But they're still they got dinged, especially Dollar Tree. Best Buy is absurdly dependent, as CEO Corey Barry said on her call. While China remains the number one source for products we sell, we currently estimate the percentage of cost of goods sold. It represents approximately 30 to 35 percent compared to the 55 percent metric we shared in March.

All right, Best Buy clearly going in the right direction. But it has to go so far that it's hard to imagine the company being weaned off Chinese merchandise anytime soon. Walmart, listen to this. Now, Walmart imports $50 billion worth of goods. And there have been a lot of false stories about there. Less than 25% are from China. OK, that's the real skinny. But Walmart's so big, that's a big number.

Target's trying. On its conference call, they said back in 2017, they were 60% China. They think they brought it down to less than 25% from year end. But that's still a lot. Oh, Stanley Bach and Decker's working furiously to get out of China. They're down from about 40% to the mid-teens. They hope to be out of China in 12 to 24 months, but it can't happen fast enough. Apple's pulling off something amazing, moving about 20% of their iPhone manufacturing to India, but the rest are still coming from China.

Still, the White House doesn't care. They want those phones made in America. So they're threatening a 25% tariff on the ones from India, not much lower than the current tariff on phones from China. What a shame. Apple is a huge employer in China, and China's a huge market for Apple. But the White House is making them leave, and they're not even getting any credit for it? If Trump wants leverage with China, he should be doing everything he can to make Apple move its manufacturing to literally anywhere else and not tariff them.

There's another wrinkle here. Some in the White House believe that allowing imports from Vietnam might give China a stealth way, a backdoor to get around the tariffs. Now, that's why Vietnam's tariffs from Liberation Day is 46 percent. That is crazy. China and Vietnam haven't been buddy-buddy since the early 70s. They still have periodic border disputes. It would be easy for our government to audit American companies in Vietnam to see where the goods originate, where this stuff comes from. Let's be a little more rigorous, please.

And Trump's first term moving from China to Vietnam was the right move. Now it's dead wrong. Retailers behind the scenes are furious. But who wants to be called out in this environment? So how could the president turn around these negotiations with the Chinese? OK, so I've been thinking about this. I always like to be constructive. I'm a constructive fellow.

Let's start small. It's not electric vehicle magnets and rare earth materials, but our government sent a note to enterprise product partner, Stock, I like very much, it's a pipeline company, recently that flagged its exports of butane and ethane to China. The White House claims they pose, quote, "An unacceptable risk of use in or diversion to a military end use." Now going forward, licenses will be needed to send these key natural gas liquids to China. Who knows if they're gonna issue them? This stuff is used to make plastics.

Now, you know that China makes a lot of plastic. It's strange that propane, a big feedstock for plastic, isn't included. Still, it's potentially a really big deal. As Russian Brazil from RBN Energy points out, quote, this has the potential to ruin the U.S. ethane market and disrupt global flows. But the U.S. is the sole source of long distance ethane exports to China. End quote. Hey, that's some leverage. Let's talk about that. That's cool.

Then there's the $50 million items that China needs once it has to have. I'm talking about the first Boeing planes. The Chinese need planes very badly. If they're denied our planes, they can't just switch to Airbus. Airbus has got to wait this long in Boeing or maybe, I don't know, you put yourself in the back, all right? Hey, how about turbines for power plants? GioVernova has installed 240 gas turbines in China. They go for about $50 million a pop. Just servicing these turbines gives us some cards to play. China needs these, especially if anyone ever stops flying.

anyone maybe just realizes that they're making all these coal plants and does something to try to stop it now those aren't low cards they're kind of i don't know maybe eights and nines you can split them if the dealer has a four but i don't think she's got a four he's got a king showing the

Now, there are some other things that could work out. Boeing sold out till 2030. G-Vernova might have room to expand its capacity, but there's so much demand for the American hyperscalers that they might not have time for China maybe to slot both of these in. We only have one ace in our hand, and apparently we don't want to play it. The chips from NVIDIA.

Under the previous administration, NVIDIA was allowed to sell China high-quality chips, but not their best stuff, which are reserved for America and a bizarre list of 18 friendly countries. Now the Trump administration won't even let NVIDIA sell their second or third best stuff. As CEO Jensen Wang said on our show, it's logical to presume that China won't use these chips for the military precisely because they're American chips. It's the same way the Pentagon would never use chips from Huawei.

So what is the military risk here? Jensen says that there's $50 billion in AI semiconductor business up for grabs in China. And Nvidia used to have 95% of that market, but today it's down to 50%. Sounds like the Trump administration would like it to go to zero. The Chinese are desperate for these chips. They could buy them from Nvidia, which has the capacity to build them now. And Nvidia could repatriate the money to build more plants right here. It's an elegant solution that I'm providing, but I fear the White House just doesn't care about my solution.

Still, if Trump wants to win this game, he may have to show his Trump card, Nvidia. As I see it, the others just don't make for a good hand. You have to play with the cards you've been dealt. And for decades, our government did everything it could to encourage outsourcing to China. They left us with a pretty lousy darn hand, both Republicans and Democrats. Between Nvidia and Apple, Trump has a lot of leverage, but he doesn't want to use it. Those two companies seem hostage to totally different agendas inside the White House. Bottom line.

I just hope that Trump's friendship is requited by Xi. We may need to change the rules or start playing a whole new game. Of course, the president could always fold and Wall Street would love it. But I don't see that happening anytime soon, nor should it. Hey, why don't we go to Stafford in California? Stafford. You're with Kramer. What do you got?

Hey, Kramer. It's Stafford here. I wanted to know what your thoughts on Viking Cruises is. Okay. I like Viking, but I thought they were tepid when they came on, and therefore I'm going to send you to Royal. I think RCL is now the gold standard, and that's the one I want to own. Hey, let's—oh, no!

The music! I went on too long. Hey, that happens. It's not a show that you, you know, it's not like a usual show. What can I tell you? I see your things, I say a lot of stuff, and it just goes into my head because it's non-linear. All right, all we can hope is that Trump's friendship is requited by she. Otherwise, we have to maybe reevaluate our entire playbook. Or maybe anytime. Last night, HP Enterprise reported what seemed like a strong quarter would set the stock higher, but it gave a lack of almost all its gains today. What gives?

I'm digging into the story. Then one dollar store is making you dollars and the other one is losing the dollars. I'm sharing why there's such a dichotomy between the discount retailers. And CrowdStrike is down nearly 6% on earnings downgrades and fall from its outage. Are investors getting a buying opportunity in the high-quality cybersecurity company? Or is the quarter a warning? I want to go straight to the source with the CEO. I want you to stay with Kramer.

Don't miss a second of Mad Money. Follow at Jim Kramer on X. Have a question? Tweet Kramer. Hashtag Mad Mentions. Send Jim an email to madmoneyatcnbc.com or give us a call at 1-800-743-CNBC. Miss something? Head to madmoney.cnbc.com.

This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information-packed daily market preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash market update podcast or find Schwab Market Update wherever you get your podcasts.

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Last night, Ewell Packard Enterprise reported what initially looked like a strong quarter. And the stock took off in the after-hours trading. Then today it gave back. Gave back nearly all the gains. So what's really going on here? First, remember, HP Enterprise makes servers, networking equipment, and storage products. They're one of the few companies with hardware that can handle Nvidia's latest generation of AI chips.

But the stock's been a major underperformer, basically flat for the past seven or eight years. Dragged down by the messy and pending Juniper Network's acquisition right now, generally sloppy execution. And now with the headaches that come with President Trump's on-again, off-again tariffs, I don't know, looking not so great to me. Now, when I spoke to HP Enterprise in October of last year, the company seemed like it was going back on track.

CEO Antonio Neri told a great story about the scale of the AI opportunity here. And over the next few months, the stock finally showed some signs of life. Now,

Then the setback started again in January, right after Trump took office again, his Justice Department sued to block the juniper acquisition. The case heads to trial in about a month. HB Enterprise also got wrapped up in this post deep seek sell off and all things that were about the broader sell off of Trump's tariffs to leading up to Liberation Day. So you just had so many things go wrong. It's really incredible.

Also, when the company reported in March, the quarter was genuinely bad. Weak margins, ugly earnings, terrible guidance. With all these negatives, the stock was more than cut in half from its January highs to its April lows.

So why even bother with the HP enterprise anymore? Simple. In mid-April, after that horrific decline, we learned that the very sharp activist investors at Elliott Management had taken a $1.5 billion stake in the company, making them one of the largest shareholders yet. While Elliott hasn't waged a public activist campaign here, these guys have an incredible track record when it comes to turning their targets around. Just their involvement usually lights a fire under management, which kind of changed my mind about this thing, believe it or not.

Since Elliott got involved, the stock's rebounded from the low teens to 17 and change, which brings me to last night when HB Enterprise reported its first quarter since we learned about the Elliott stake. I figured this would be a decisive moment. Either they turn things around on their own or the numbers are so bad that Elliott decides to turn up the heat. As it turns out, the numbers were solid. HB Enterprise reported a healthy revenue beat with strength across all three of their divisions, Server, Hybrid Cloud and Intelligent Edge.

They also delivered better than expected margins, a three cent earnings beat off a 35 cent basis. Management even had some good things to say about the products that analysts are focused on, specifically the AI product portfolio and their GreenLake hybrid cloud platform.

For AI systems, HP Enterprises signed $1.1 billion in new net orders. The company recognized more than $1 billion in AI revenue in the quarter, up from $900 million a year ago. And their AI systems backlog reached $3.2 billion. Meanwhile, the GreenLake hybrid cloud business saw its annualized revenue run rate grow at a really good 47% year-over-year.

Unlike previous quarters, these solid results weren't undermined by bad guidance. HB Enterprise gave a stronger than expected revenue outlook for the current quarter. And while they lowered the high end of their full year revenue forecast, not great. They also raised the low end of their full year earnings forecast. Good.

The guidance updates jived with management's tone on a conference call last night, which was still guarded but incrementally positive. CFO Marie Meyer said that while microeconomic uncertainty weighed on customer demand early in the quarter, well, that's since improved.

The hit from the tariffs also wasn't as bad as feared. HPE Enterprise makes some of its products in Mexico, but because the products are USMCA compliant, they won't be tariffed as high as previously thought. Originally, management was expecting a 7-7 per share earnings hit here, but now it's looking like, I don't know, 4 cents. HPE still thinks they can make this Juniper Networks deal happen too, even if they have to defend it in court.

I think they've got a solid case here, but we'll see. There were also questions about Elliott's involvement, but management punted on that. If you take a step back and think about the quarter as a whole, here's what I'd say. HB Enterprise was fine.

I don't mean that as an insult. Fine is a definite improvement from the last quarter, which was outright bad. But what really happened here is that HP Enterprise outperformed the expectations that it had lowered when it offered that atrocious guidance back in March. The company's results for the reported quarter were well below where the consensus estimates for the period stood back in March. The company simply got those consensus estimates lowered by offering a terrible forecast back then.

Now it's outperformed those lowered expectations. And while that's certainly better than underperforming, I can't bring myself to be too excited about it. The fact of the matter is we are much more positive things from Dell Technologies last week. Dell's enterprise division does basically all the same things as HP Enterprise, though the former has PCs and the latter has networking equipment and Dell simply doing much better.

HPE at $1.1 billion in AI systems orders. Dell at $12.1 billion. They're not even the same league.

Plus, overall, Dell's expected to grow earnings by 15%. That's really high. That's for this year. While HP Enterprise is looking at a 7.5% earnings decline at the midpoint of its forecast. It'd be one thing if HP Enterprise was selling like a 10 times earnings or something, while Dell traded at 20 times earnings. But Dell sells for 12 times earnings and only slightly more expensive than HPE, which is insane because Dell's running circles around them in AI and their core business has much better growth.

That said, HP Enterprise really is doing better than it was three months ago, and that's worth something. But nothing I heard yesterday was positive enough to get me particularly bullish on this one, especially when Dell's in much better shape and only a little bit more expensive and has come down a great deal. Here's the bottom line. I can't get enthusiastic enough.

Well, maybe I can't get too enthusiastic about Ewell Packard Enterprise until one of two things happens. Either they see a dramatic improvement in their business or the activists at Elliott Management decide to get their hands dirty and turn this thing around by any means necessary. For now.

Neither of these things seem to be happening. So, look, let's say you like HB Enterprise. Let me just tell you something. You will love Dell, which is a far superior option at this moment. Mad Money will be back after the break. Coming up, Kramer's digging for discounts, and he's analyzing the earnings reports from Dollar General and Dollar Tree to see which chain is offering the better bargain. Next.

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All right, what the heck just happened to the dollar store stocks? For the last couple of months, these stocks were soaring as discount retailers tend to do better when the consumer's feeling stretched in. And you know the consumer's feeling that way. But Dollar General and Dollar Tree have behaved very differently after reporting earnings over the past couple of days. When Dollar General announced its results yesterday, the numbers were excellent. The stock caught fire. Then today, Dollar Tree reported what I also thought was a pretty good quarter. But its stock got eviscerated, down 8%.

What explains the disparity here? Why don't we just go through both of them? Dollar General turned in a truly impressive quarter yesterday morning. Higher than expected revenue, 2.4% same-store sales. Hey, look, the street was only looking for 1.5. With strength across every major product category. It was really a tour de force quarter. Their gross margins came in comfortably ahead of expectations thanks to a decline in shrink fueled by a crackdown at the self-checkout line. All the success flowed into the bottom line with Dollar General down.

Their earnings were $1.78 per share, well ahead of the $1.48 that Wall Street was looking for. Their earnings here were excellent. As for $1.03 that we got this morning, their headline numbers told a similar story. Sales grew 11.3% to 4.4%.

4.63 billion, well ahead of the estimates. Same shortfall has erupted 5.4% of the stream. It's only looking for 4.0. Dollar Tree also delivered a 5 cent earnings beat off a $1.21 basis. Not quite as good as Dollar General, but it was a dozen years ago when Dollar Tree's stock fell off a cliff. No, the difference between these two comes down to what they had to say about their ability to control costs and offset the impact of, you bet, go ahead, the president's tariffs.

Now, both companies have been committed to keeping prices low. When they reported results yesterday, Dollar General reiterated their commitment to being a safe harbor for low-priced goods at a time when the consumer is looking for a deal. Dollar Tree echoed that same sentiment, noting that the average unit retail price when their first dollar store was opened was $1, and now, nearly 40 years later, it's about $1.35, with 85% of the items in their store still priced below $2.00.

Hey, that's an incredible bargain given that inflation over the past 40 years, a dollar in 1985 would be worth about $3 in today's money.

And consumers of all stripes clearly recognize when they're getting a deal. As I mentioned at the top of last night's show, the Dollar General conference call, they cited a survey where their customers are reporting that they have less income than they did a year ago. Get this. This is some statistic. 60% of their core customers felt the need to sacrifice some necessities in the coming year. Not a great sign for the economy, but hard to argue that this makes the dollar stores less compelling.

Dollar General's got growth across all sorts of income cohorts. As a result, the company's benefit, quote, increased trade-in activity in both middle and higher-income customers, end quote. Hey, trade in, trade down, whatever you want to call it. Higher-income consumers are increasingly shopping at Dollar General. Now, that's a good thing for the company. Not a good sign for America, though. But, hey, I mean, you win some, you lose some, right?

Dollar Tree echoed a similar sentiment this morning with management noting that they saw improvement across all income levels, with the most growth actually coming from higher income consumers, particularly those with a household income of more than $100,000. Now, you might wonder what's bringing these fairly well-off people into the stores. But as Dollar Tree sees it, their, quote, low prices and smaller pack sizes are perfect for families trying to manage a tight household budget, end quote. So the consumer clearly loves the value proposition for the dollar stores because they can undercut pretty much

anyone other than Costco on price. Unfortunately, we're also in the middle of some volatile trade negotiations. The president's tariffs potentially hurting their ability to keep prices low. And this is why Dollar General soared yesterday and Dollar Tree plummeted today because Dollar Tree seems to have trouble. Well, let's say more trouble with the tariffs.

At Dollar General, management remains confident they'll be able to navigate these challenges by pulling a few levers, negotiating cost concessions with their vendors, shifting manufacturing to other countries when possible, or even just finding substitute products made in places where the tariffs are lower. While management is confident this can work, they do expect the tariffs to result in some price increases as a last resort. That's the quote they used. Now, Dollar Tree is a little different. They

They also talked about mitigating the damage from the tariffs, but they indicated that they may be having a harder time making that happen. In their press release, Dollar Tree disclosed that their earnings from continuing operations this quarter could take a 45 to 50 percent hit thanks to the tariffs. Although management believes the numbers will reaccelerate later in the year and they'll be able to make the numbers in their full year forecast. But that was dreadful.

It was actually shocking. Now, to be fair, some of that cost pressure has to do with Dollar Tree's divestment of family dollar, which was this thing they bought for a ton of money and they realized didn't really work out that well. It's still enough to spook investors, so it didn't help when it on the conference call. Management noted that they absorbed some costs during the brief window when 145 percent tariffs on China were in effect. Ouch.

This timing issue resulted in $70 million more in cost of goods sold for the second quarter, which they say will be flowing through the system, quote, before the full breadth of our mitigation efforts are deployed, end quote. As a result, we got that concerning note about second quarter profits being, quote, meaningfully lower than last year. Well, it's hard to keep margins intact when you're selling formerly cheap goods from China purchased with 145 percent tariff.

So even though Dollar General and Dollar Tree are very similar companies, their stocks had totally opposite reactions to earnings. And some of that's because their supply chains have some notable differences. While both companies source some of their merchandise from overseas, especially from China, there's a major difference

in how much each company imports directly. See, Dollar General only imports 4% of its goods directly from foreign manufacturers. For Dollar Tree, it's 40%. The rest comes from middlemen. As it turns out, when there's a middleman, the dollar stores have a lot more bargaining power. When you have a direct contract with the manufacturer, you have way less leverage. That's how Dollar Tree ended up paying the $140,000 tariff, even though it was only in effect for a month.

As for Dollar General, this is mostly a case of not my problem. Even if one of their main suppliers got hit with these tariffs, their suppliers are middlemen, meaning Dollar General can easily walk away if they don't want to cover the cost of the import duty.

They are in the driver's seat versus Dollar Tree. I got to tell you, I don't think I touched Dollar Tree down here and I still want to buy. I would still buy Dollar General. So let me give you the bottom line. Well, both these companies might have the word dollar in their names. The subtle differences in their supply chain structure are having a huge impact on their stocks. That's why Dollar General soared yesterday and Dollar Tree is now in a

The House of Pay. And it's why you should watch out for the distinction between direct imports and indirect imports in the rest of retail, because going forward, it's really going to matter. Let's go to Ty in Arizona, please. Ty. Professor Kramer. How are you doing? How's it going? All right. How are you doing? I'm doing good. Thanks for taking my call. I wanted to give a big buh-buh-buh-boo-yah birthday shout out and Father's Day shout out to my dad, Brian. Now you're talking. That's what I want to hear. Yeah.

Absolutely. Shout out to all the dads out there. My dad's been an amazing father figure in my life. He's taught me how to save my money and invest it as well. So thank you for that, Dad. I love you very much. Now, my question, Mr. Kramer, is about a stock holding in my portfolio that's kind of lacking. It's CMG.

Hey, come on. I had a really good day. I mean, I was looking at it. I come out of the doctor's office. I say, oh, give me something new. Give me something good. And suddenly I see Chipotle starting to roll. I mean, the stock was up $2. You know I'm pulling for Scott Boatwright. I think we're in good shape. I think we got to tell you, this one's been just treading water because maybe they raised prices too much. But I think Chipotle's making a comeback. I want to be a buyer. And happy Father's Day to your dad. Let's go to Adam in Georgia. Adam.

What's going on, Jim? How's it going, buddy? It's not bad. How about you? Man, if I was doing better, Jim, I would get arrested.

Wow. Now that's a statement and a half. I may have to use that tomorrow when I talk to my wife. She'll like that. What's going on? Don't be taking my lines, Jack. She's never watched a show in her life. She doesn't even know I have a show. I think I'm safe. I'm safe at home, my friend. What do we got? Yeah, but I'm not. I'm not. Okay. Check it out, Jim. How do you think Home Depot is going to be doing in

in the long term. Oh, man, I was making calls on Home Depot today because it's starting to roll. And then, wouldn't you know it, it pulled back right at the end. I think we're in good shape. I think when rates just stay stable, we'll be fine. I think that the gardening season is coming along fine. But...

Let me just say, people just look at housing stocks and they say, let's sell Home Depot. Don't be constrained by that. I think they're going to have a great year. Let's think seven years, not seven days. Thank you, Larry Fink, for that. I love that. It was in the FT yesterday. All right. The dollar stores may seem similar.

But differences in their business models have had a huge impact on their stocks. Supply chain management really does matter here. And remember, right now, I prefer dollar general to dollar tree. Even though dollar tree stocks going down, it's not gotten cheaper.

Mad money ahead. What do we got? My exclusive with CrowdStrike. OK, man, I thought they had a great quarter. The street didn't. And then we got to deal with this DOJ and SEC requests. You know, I'm going to ask everything that you want to hear. Deregulation, by the way, was the hallmark of Trump's campaign. And we're finally starting to see some of the impact. I'm sharing why it's a welcome change. And the way to call us rapid fire tonight's edition of the lightning round. So stay with Kramer.

what do we make of the sell-off in the stock of crowd strike that's the best of these suburbs career play one way home for the chapel trust dropped nearly six percent today after reporting a solid quarter last night and one point was down a lot more than that

First of all, you got to keep in mind that the stock came in hot. CrowdStrike had rallied 64% from the April lows through the close last night. It was priced, I say, for perfection. But the quarter wasn't perfect. They delivered inline sales and decent earnings beat, but the revenue guidance for the next quarter was considered to be a little light. Yeah.

We've got to find out about that. So are the sellers overreacting to what seemed like a solid report? Or is this just what happens when a stock gets too hot? Let's check in with George Kurtz. He's the founder and CEO of CrowdStrike. To find out more, Mr. Kurtz, welcome back to Mad Money.

Great to be here, Jim. OK, so, George, we do need to do a little bit of explaining because people were confused. There were three downgrades and everybody else raised the price target. So you kind of feel like there must be some difference of opinion here. Can you just tell me how when you did your guidance, which seems to be a bit of a problem, did you see it as being exceeding what you thought or was it really below what you thought?

Well, I think when you look at Q1 performance, we came in line with our guidance. And part of what we tried to explain is with our CCP program, those are the programs that we created to help our customers get past the outage. Right, go ahead. Right, customer care package.

And when we created those, not only for customers, but also for partners, and we created a very robust incentive program for partners, which ultimately was an investment and we exceeded our expectations. So, we called that out in Q1, and that was an $11 million deduction from revenue. It's a contra account. You would think it would be an expense, but the accounting treatment is you actually deduct it from revenue. And then we also demonstrated how that flows through the rest of the year. So,

We never had a CCP program before, so that was a new line item and we wanted to make sure that people understood what it was. But I think at the end of the day, you got to look at what was the net new ARR and that was 194 million, way above street expectations.

with free cash flow of $279 million, a record. And of course, 97% retention rates. Customers are staying with CrowdStrike. People need to know this is the annual recurring revenue number. Now, George taught me a long time ago that annual recurring revenue is how to grade companies. And I

I thought that your annual recurring revenue was one of the most, really one of the best things. But another thing that you've taught me, remaining performance obligations increased 45%. Again, something that I thought was better than what people were looking for.

Yeah, when you look at RPO, that's really going to be a function of Falcon Flex. And this is our innovative licensing model, which allows customers to use all of the Falcon products based upon a commitment. So they commit. The more they use, the quicker they use it, the greater opportunity we have. And you could see the contract duration actually increase. And on average, what we're seeing with Falcon Flex customers is 31 months

specific to those contracts. So you're seeing these performance obligations that are to come and ultimately it's a great indicator for the health of the business. - Another indicator that we need, of course, we're coming to annualize a glitch that is not a hack.

but a glitch that brought down a lot of terminals. And I'm anxious to know that when you did your, what I guess could be a charm offensive, so to speak, when you visited 130 customers, how many of the customers have said, you know what, I love you, George, but I got to go away from you?

Oh, not many. I mean, you could see that, Jim, based upon the 97% retention rates. You know, big customers, small customers. What we typically hear is, you guys handled it the right way. You stood behind your product. You gave us what we needed in terms of changes. You learned from it, and you moved forward. And

And we see time and time again, they say we have the best technology. They can't live without it. So I think we handled it the right way. I think customers respect us for that. And ultimately, we gained greater intimacy with those customers. And they're buying more through Falcon Flex. Speaking of buying more, you announced a billion-dollar buyback. I was quite surprised, frankly. And the reason I was surprised is because the stock was at its high. Why announce a buyback when the stock is high?

Well, that's a great question, Jim. So we authorize the buyback, and we want to be opportunistic in being able to buy that back. So depending on how the stock trades, of course, you want opportunities to take advantage of that. That doesn't mean that we won't still be acquisitive. But at the end of the day, we've got tremendous cash flow. We want to have a plan in place to take advantage of that.

of, uh, of these opportunities. And at the same time, we're always going to be in the market looking for innovative companies to continue to add to our growth and our innovation. All right. Now we got to go, uh, for some news that you reveal, which is, uh, you received, uh, some correspondence from the justice department, which is criminal and the sec, which is civil requested information, which they've criminalized. It just means that there could be something wrong with the financials. I'm not talking about anything more than that, that I know of, but, uh,

But you've received additional inquiries from the government and agencies and third parties regarding the July 19th outage. This is pretty heavy stuff, George. Now, I know you can't necessarily talk about any ongoing litigation, but do you think there's a possibility that you may have to issue a restatement of your earnings?

Well, Jim, first, we stand by the accounting of these transactions. We've said this before. We updated some of our disclosures around it. So there's really nothing new around that other than some updates. And as I said, when we think about July 19th, you had lots of folks asking questions. They ask questions. We respond to those. But what's most important is we stand by the accounting of these transactions. When they ask for these, are you fighting any subpoenas? Or you just said, OK, we'll send you everything we have?

Yeah, I mean, ask a question, we answer the question. We'll tell them what we know. Okay. And that's how we operate. All right. Look, I think that everybody—to not ask, George, is to not do my job.

I don't want anything to happen, but it's serious business because I have seen investigations of numbers. And it's not like they say, OK, that sounds good. They say, all right, well, we're going to look at it. And then a year from now, they come back to you. I mean, there is a bit of an overhang here. Obviously, they they're talking right now about what happened July of last year.

Well, as you know, I mean, the government takes time to work through things. But as I said, Jim, someone asks a question, we're going to cooperate. It's an inquiry and we'll give them the answers they need and we'll go from there. But like I said, we stand by the accounting of those transactions. Excellent. OK, so Chantix, let's just talk about that for a second. You're saying we're on the cusp of the fifth industrial revolution with artificial general intelligence on the horizon. Why do we have to worry about that if we're talking about cybersecurity?

Well, when we think about autonomous agents, and Jim, you've got a lot of other guests that are working on creating these agents in various companies, which we all know we work with. As these autonomous agents get released,

They are like super humans. They have access to data. They have access to identities. They have access to SaaS systems and workflows. And you're going to need to instrument those and protect those just like a human would. You're going to have to give visibility into these agents. You're going to have to protect them. You're going to have to be able to report compliance.

around them. And we think it's a massive opportunity for CrowdStrike in the future. We think about the number of humans and computers we protect. AI agents could be in the billions. And we're really going to be at the forefront of being able to protect those because that's what we do today.

both for human and non-human identities. Are there companies in the financial sector that are interested in these and companies, law firms, accounting? Because that's where I think that they could have the most cost saving, but they tend to be very conservative and probably be afraid of what you just said.

Well, I think there's not a business on the planet that isn't interested in AI and ultimately saving time and money. I mean, if you can accrue these benefits to the bottom line, ultimately that's a good thing and you can flatten the hiring curve, which a lot of businesses are looking at.

Of course, there's a lot of regulated environments. You have to be able to implement these in a safe way. You have to put guardrails around them. You have to create policy so that sensitive data can't escape out. You got to make sure that models don't give and leak information that's sensitive to customers, et cetera. So all of that is that fifth revolution, industrial revolution that I talked about, and it needs protection. And it's a massive opportunity for us and the security market in general. Well, look, I've got to tell you, I thought that,

that it was a good quarter. I think that what you're talking about, the Gentics is a mint for multiple years. We raised our price target last night for the travel trust because we couldn't really understand what the hoopla was. But I want to thank George Kurtz, founder and CEO of CrowdStrike for coming on Mad Money. Thank you, Jim. Great. Absolutely. Mad Money's back in. Coming up, Kramer takes your calls and the sky's the limit. It's a fast fire lightning round. Next.

It is time. It's time for the Light Round. That's right. And then the lighting round is over. Are you ready, Steve? It's time for the Light Round. Let's start with Jim in New Jersey. Jim. Hey, Jimbo. How you doing? I am doing well, Chief. How about you? Hey, I didn't go down the beach because I wanted to talk to you, brother.

20 years. Congratulations. Thank you very much. For 20 years, I was following you, and that's why I have a lucrative retirement. Even when I was in the desert living in Kuwait, I used to wake up because there was an eight hours difference and put your show on, man.

You're terrific. Because I was making mad money over there back then. I love that. You know, it's interesting. I was bumping through a guy today. He said he watches it in India. I don't know. A lot of people watch this everywhere. You can't beat that. Let's go to work, Jim. What do you have? You're the guru, brother. You're no Jon Stewart. I saw that back 20 years ago. He was wrong with you. You're the man. He could bounce you like a pagan god. But listen, I got a question for you. I like Martha Stewart.

Wait, is this Stewart? No, John Stewart. Stewart's hot dog? Oh, I thought Stewart's hamburger. I like that. There's a lot of Stewart's, my friend. You know Stewart's down the shore. All right, let's go. What's up? You're mad, man. All right, listen.

Okay, I backed. I got all your magnificent sevens. They were at discounts and all that. So I'm set for the next 20 years. Okay, this one's very interesting, and it gained 18% today. Should I get rid of it, make my money, and go home? What is it? It is P-D-Y-N, Paladin A-

Oh, man, after all that, I don't even know it. I got to go with Ben. Ben's on broad. I got to go to Ben Sturte. We got to work on that one. That was the only call we're taking this lady around. Just kidding. Michael in Pennsylvania. Michael. Michael, you're up. Yes. Go ahead, Jim. All right. Okay. Go ahead. Yeah. All right. You're up. Hello, Jim. Thank you for taking my call. Sure. I'd like to ask you, with the administration being against clean energy, I own shares of Dominion Energy.

I like Dominion. It's fine. For a while, I was worried about the balance sheet. I think we're okay. I think we're okay with Dominion. I need to go to Bobby in Georgia. Bobby. Bobby. You're up, Bobby. What's going on?

Yeah, Mo, good to hear for your voice, man. Praise the Lord. I just want to ask you a question or two about IRM, Iron Mountain. No, not a fan. Yield too low. Not there. Let's go to the next. Kirk and Al, come on. And that, ladies and gentlemen, is the conclusion of the lightning round. The lightning round is sponsored by Charles Schwab.

Coming up, could a wave of deregulation lead to more buying opportunities for investors? Kramer's peeling back the red tape to find out next.

There are many reasons why Trump won in November. Inflation, immigration, culture war, backlash. But there's one reason why the business community got behind him in a way they never really did in 2016 or 2020. And that's deregulation. The Biden administration hired a bunch of Elizabeth Warren staffers to run their economic agenda. And corporate America didn't like it one bit.

Now we have a president with a pro-business agenda, but rather than being universally pro-business, it's more selectively pro-business. Some industries win, others lose. So far, it's been a decidedly mixed picture. We've seen big deregulation in the oil business.

President quickly ended the so-called pause on the new liquefied natural gas export approvals, which was an insane policy because not gas exports have so much potential. We know Trump wants to deregulate pipelines. We wouldn't have dispatched three cabinet members to the Arctic National Wildlife Refuge, although drilling there seems more like a way to stick into the environmentalist and actually boost oil production. It's the cost of drilling up is way too high.

Better to upend the Jones Act, which prevents foreign flagships from taking oil from one U.S. port to another. As far as natural gas, we have the most in the world already, mainly in the South, but also in the Pennsylvania and Ohio basins. Beyond energy, I'm starting to see some crucial deregulation in banking.

And I think it can really help the economy. More importantly, from a stock picking perspective, it can definitely help the companies being deregulated. This morning, we got the chance to interview Charlie Sharp, the CEO of Wells Fargo. Talk about the Federal Reserve's removal of the asset capital in his bank last night. It's the third largest by deposits.

The cap was imposed seven years ago as punishment for the misdeeds of the previous regime. They fortunately opened millions of fake accounts under their customers' names. Wells certainly had it coming. Back then, it was, but it was a severe penalty. And after Sharp took over, he had to change pretty much everyone who was supervising transactions, also a lot of members of the board, as well, let me just say, as most of the executives.

He worked for six years to make sure that such behavior couldn't happen again. Charlie had to work through 13 different consent decrees, for heaven's sake.

The different difficult thing for Charlie, no matter what he did, no matter how much he cleaned up root and branch, the Fed refused to lift the asset cap, which meant Wells Fargo had to forego as much as $400 billion in deposits, leaving a huge amount of money on the table. I knew the Biden administration wouldn't lift the cap. They had zero sympathy for big business and they didn't like the banks. Now,

A little more than 100 days in the new administration. The cap is off and Americans have one more big bank that can compete for depositors. Then use that money to make more loans. This one comes on the heels of a decision by the administration to let Capital One merge with Discover Financial.

By the way, that was another deal that was held up by Biden's draconian antitrust regulators. I welcome this deregulation, not because I'm some sort of laissez-faire ideologue, but because it allows competition to scale. Wells Fargo can now give J.P. Morgan a run for its money. Capital One can now challenge the American Express and other top credit issuers, credit card issuers. The Biden administration seemed to hate all mergers, but sometimes smaller competitors need to join forces if they want to go toe-to-toe with the big guys. While I'm at it, let me say that both of these stocks are tremendous buybacks.

Buy, buy, buy! Capital One will be able to purchase a ton of stock come July. Wells Fargo will be able to save a ton of money as the endless compliance monitoring may have finally run its course. Seven years of purgatory is enough already. The all-new Wells deserves to be let out of the doghouse.

My hope is that the deregulation will continue because that's exactly what we need after four years of heavy handed regulation. Capital One Discover, no capital in Wells Fargo. All I can say is it's about time. I like to say there's always a bull market somewhere. And I promise I'll find it just for you right in your mid money. I'm Jim Cramer. See you tomorrow.

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