I have an understanding that the edge is a core area for Cloudflare, but I won’t go into it deeper now. And indeed, there are certainly many companies that are ahead in different products.
Cloudflare knows how to manage its business. Below, I’ve included a chart of the trailing 12-month free cash flow per share. A stock investor wants to see it exactly like that. Even though net income is at a loss, free cash flow means more to the company’s valuation than net income.
I often say that Cloudflare generates consistent results. I mean exactly what is shown below.
The tweeter is satisfied with how Cloudflare’s management has balanced revenue growth and profitability.
In 2022, the market demanded more profitability, and the company’s management then clearly stated that they would slow down revenue growth to improve profitability.
The chart shows that free cash flow ( and operating cash flow have strengthened at the same time as revenue growth has correspondingly slowed down.
This, according to the tweeter, in my understanding, demonstrates the company’s good financial management and ability to adapt to market expectations (is it always the best solution looking further ahead… )
Below is a tweet about Cloudflare, which is a somewhat inconspicuous but apparently powerful player in internet infrastructure.
According to the tweet, it is not just a web company or a cybersecurity player, but it is reportedly revolutionizing AI adoption and security. Its network covers over 310 cities, enabling real-time AI without delays. According to the tweeter, this gives it a significant competitive advantage and makes it a key player in the next phase of internet development.
This feels quite wild, so BofA Securities raised Cloudflare’s recommendation to “buy” and the target price from $60 to $160. According to them, growth is supported by the strong position of AI services and cybersecurity solutions.
The tweet below describes how Cloudflare has acquired the developer-friendly Outerbase platform to strengthen database support in its Workers service. The goal is to facilitate the development of AI-powered applications and support programmers without deep SQL knowledge.
This second tweet of the same type describes how Cloudflare has introduced Workers VPC and VPC Private Link, which allow developers to securely build global applications across different cloud environments.
The solutions remove the regional and network-technical limitations of traditional VPCs and enable connections to external systems.
Cloudflare reported a strong start to the year and achieved the largest single contract in the company’s history, backed by its developer-focused Workers platform. The company also signed its longest SASE contract to date, which reportedly strengthens its position in the enterprise customer segment.
That’s right. Cloudflare is a good SaaS company for investors because the company’s growth is very stable; revenue growth is slowing down a bit, but 27% is still a good result. Similarly, margins and other figures are nicely stable quarter after quarter.
The tweet below summarizes the key points from the earnings call. The tweet explains, among other things, how the earnings figures were already known, but the earnings call still brought up interesting highlights: Cloudflare signed its largest-ever deal, worth over $100 million, and significantly grew its large customer base.
The call also mentioned how “sales cycles” shortened, competitive pressure eased, and cash flow remained strong. The focus is now on disciplined growth and demand-driven investments.
Indeed. The company consistently adds customers, and revenue grows proportionally a bit faster, because the NDR (net dollar retention) of existing customers, meaning purchases in the following year compared to the current one, is always over 100%; now it seems to be 116%. So, even if no new customers are added, 16% growth is achieved with existing ones. When new customers are added to that, a beautiful compound interest effect is created, as all key metrics begin to improve nicely and accelerate.
I have been pondering the company’s steady development. My assessment is that the company does a lot of product development according to customer needs, slightly behind demand, meaning no waste is generated, and everything then naturally sells. Cloudflare is Cloudflare, doing its own work in its own way.
Cloudflare has launched a “Pay per Crawl” marketplace.
It allows website owners to charge AI bots for automatically collecting data from their site, set a price, or allow it for free. They can also block data collection.
It will also be interesting to see what kind of cat and mouse game emerges between bot maintainers and Cloudflare in bot identification, when in the future data will have a price if a bot doesn’t pass as human. But that is somehow exactly this company’s style of feature. It won’t bring any significant added business from an investor’s perspective, but it supports the narrative.
Let’s write here a bit about experiences as a Cloudflare customer (and of course also an owner).
The main products we use are mainly CDN / DNS / WAF / Zero Trust and Workers cloud with its additional features.
I think I’ve commented on the thread before that Cloudflare’s products are excellent and the support has been first-class. Regarding support, the emphasis is on the word “has been”. It’s not really anymore.
My responsibilities are mainly on the Workers side of things. The products are advancing at a great pace and are relatively simple to use, but they also change so rapidly that more and more time is spent on unnecessary maintenance when the latest version of product x is not compatible with the previous version. Similarly, there have been more and more outages and minor disturbances in service availability, which are often just dismissed as temporary issues.
Also, regarding support, response times have grown and grown, even though we are under an enterprise agreement. What used to be the last resort, “call the account manager,” doesn’t seem to work anymore either.
I don’t know if these are just temporary growing pains and a positive problem from an investor’s perspective, or if Cloudflare is trying to leap forward a bit too quickly. The quality of services should be restored to its previous level if they want to keep current customers satisfied and get them to move even more business to the Cloudflare platform.
With a completely overpriced stock going into the quarterly report. And what comes out of it: Revenue and adjusted EPS beats, as well as Q3 guidance comfortably exceeding estimates. “Business is rolling forward at a fast pace and demand is strong.”
In after-hours trading +5% ($218). If the rise materializes tomorrow, the stock will technically close at ATH (All-Time High) levels and the trend will continue upwards.
According to the current trend, when a company is AI, the investor doesn’t need to be a fool
According to the latest earnings report, repurchases from the old customer base seem to have grown after several years of decline; the figures, which were around 120% in previous years, are not visible in the image. That S DBNR (below) is likely one metric of customer satisfaction:
Yep, pricing has always been the same for Cloudflare. Wall Street likes the company, in my opinion for the following reasons:
100% SaaS company
Clockwork precision in improving growth and profitability. The annual revenue just recently broke 1 billion, and now the trailing revenue is 2 billion.
The company lacks cyclicality. Even in the bear market of 2022 and 2023, the company grew between 30-40%.
Generates positive cash flow and has a strong balance sheet.
Additionally, it’s a company of the new SW world, meaning it disrupts.
Q2 confirmed the aforementioned points, even though growth was only 28%. But the market does not perceive 28% growth negatively.
