Flexible pipes are commonly exposed to damages on the outer layers due to abrasion with seafloor or improper installation and operation, which may render them vulnerable to birdcaging failures. This paper presents a finite element model for the residual axial compressive strength evaluation of a flexible pipe with local damage on the outer layers. The elastoplastic nonlinearity of tensile armour steel layers and hyperelasticity of polymeric outer sheath are taken into account. This model is verified against existing test data. Parametric studies are then performed by varying the damage size in either the pipe axial or circumferential directions. The flexible pipe axial resistance, deformations, as well as the tensile armour wires layers stress states near the damaged section under different damage and axial compression conditions are discussed. The case studies show that damage on the outer layer, especially the anti-birdcage tape layer, is highly detrimental to flexible pipe residual strength against axial compression. The present results and discussions are instructive in understanding the flexible pipe birdcaging mechanism.