Ben’s Portfolio update end of March 2025
Returns and portfolio holdings:
Portfolio Notes 2020 63.6% Since May 12, 2020, when I started this portfolio with over 40 companies, mostly holding large cap tech & FAANG, but also some high-growth SaaS. 2021 13.1% Discovered Saul’s board in February 2021 and started concentrating to 16 companies through December 2021. 2022 -60.7% (-15.6% Jul-Dec) Concentrated a bit more through July 2022 from which point I started posting my monthly updates on Saul’s board, holding about 12 or fewer positions. 2023 77.8% First full year of Saul-style investing 2024 31.7% 2025 YTD Month Jan 9.1% 9.1% Feb 5.0% -3.7% Mar -10.4% -14.7%
Time stamp: March 31st, after market close
These are my current positions:
Mar 2025 Feb 2025 First buy* Nvidia 19.3% 18.7% 5/13/2020 Cloudflare 17.7% 19.4% 11/2/2020 Snowflake 12.7% 13.3% 2/8/2021 Crowdstrike 12.2% 11.7% 5/13/2020 Axon 9.8% 8.2% 4/2/2024 Datadog 9.5% 9.4% 5/13/2020 Samsara 6.6% 7.1% 1/8/2024 Monday 6.4% 6.7% 9/13/2021 Zscaler 4.1% 3.5% 3/4/2021 TradeDesk 1.7% 1.9% 5/13/2020
*held through today
Time stamp: March 31st, after market close
Company comments
Zscaler:
Key insights:
- Zscaler continues with its trend of slowly decelerating revenue growth. With emphasis on the word “slowly”, I expect revenue growth to drop to around 22% by 1Q26, from currently 23% in 2Q25, based on updated billings model and cRPO growth of 22.7% YoY.
- Billings was weaker than I had expected this Q, but they raised their FY guide meaning they’ll have to catch up in Q3 and Q4 and grow billings faster than they did in Q3 and Q4 of last year.
- Customer growth was exceptionally strong this quarter with 126 net adds in $100k+ customers (up from 112 last Q2) and 35 net adds in $1M+ customers (up from 29 last Q2).
- NRR was up again (to 115% from 114%), after being down every quarter for the last two years, which his an encouraging sign of stabilization and maybe even reversal.
- Good profitability metrics, continuing margin improving trend and focus on increased R&D spend.
Zscaler reported Fiscal Q2 2025 on 03/05/25. My current investment thesis for Zscaler has been slowly decelerating revenue growth while slowly improving their good profitability margins (which is why this company is in second-to-last place of my portfolio allocations). I still think it is worth holding onto the position though because of the relative durability of revenue growth (i.e. slowly decelerating) combined with a good profitability trend. Last Q I hypothesized that their Q1 numbers (specifically billings, and FY billings guide, but also secondary growth metrics such as RPO) show that they should be able to keep up with the trends of the last quarters. So let’s see if and how the recently released Q2 numbers change this thesis.
Revenue came in at $648M (3.2% QoQ, 23.4% YoY) versus my expectation from my billings model of $656M (4.5% QoQ, 25% YoY). While I haven’t done it in a while, I thought it was worth updating the billings model with the billings to revenue correlation including the last couple of quarters; here it is:
If you want to use this model to predict next quarter’s revenue with the average billings of the last four quarters, you’ll just have to insert the average billings of the last four quarters into “x” in the equation. Then “y” is the revenue predicted for the coming quarter. For those of you familiar with statistics the shown linear equation is an excellent fit with an R^2 of almost 1. Intuitively, you can just look at the residuals below the plot to get a feeling to within plus/minus how many million dollar this updated model has been off in the past. Using this updated model the revenue prediction for Q2 would actually have been $651M and as you can see from the last point of the residual plot, it was off by just above $3M.
There is an interesting nuance to this, which I hadn’t thought about until just recently: We can use this model to not only predict the coming quarter’s revenue, but also the next Q1’s revenue; by using the FY billings guide and dividing it by four (we can also play with factoring a beat, but if we just take the guide we get a conservative prediction for Q1 FY26, which is 3 quarters out from now: Their most recent FY25 billings guide was for $3.168b. Plugging one fourth of this into the model gives a predicted Q1 revenue of $768M, or 22.4% YoY growth. This is just one percent less than this Q2’s YoY revenue growth. It is also noteworthy that in order to just meet their FY billings guide for this year, they’ll have to accelerate QoQ billings growth either in Q3 or in Q4 or both, when compared to last year. So unless they’ll miss their FY billings guide (which they never have so far), the relative weakness in Q1 and Q2 billings will have to be compensated for with stronger QoQ growth than we saw last FY in Q3 and/or Q4.
This is especially true since they also missed my Q2 billings expectation of $754M. They managed significantly less at $743M. At the same time they raised their FY billings guide by 0.6% which also points to stronger relative billings growth in Q3/Q4. In any case, taking the new Q2 billings number together with the preceding three quarterly billings, the updated model predicts Q3 revenue of $679M (4.8% QoQ, 22.8% YoY).
So while all these billings numbers support a thesis of relative revenue growth durability (slight deceleration), we can also look into the secondary growth metrics we got this Q2, and here things look pretty good:
RPO grew 4.6% QoQ to $4.62b, or 27.7% YoY which is a nice acceleration from Q1’s 26.4% and Q4’s 25.9%. cRPO grew 4.6% QoQ to $2.26b, or 22.7% YoY, which is in-line with this quarters’s revenue growth of 23.4% and my conservative Q1 FY26 prediction of 22.4%.
At the same time they were able to increase their NRR again to 115%, up from 114%, which is the first up-quarter since it started dropping over 2 years ago. This is an encouraging sign that NRR is stabilizing and might even go up again in the future.
For me, the highlight of this report was their large customer growth numbers: $100k+ customers grew 4% QoQ, adding 126 customers, significantly above Q1’s 65 and last Q2’s 112. Similarly, $1M+ customers grew 6% QoQ, adding 35 customers, significantly above Q1’s 18 and last Q2’s 29.
Finally, profitability was largely in-line with my expectations and continues to show a trend of slowly improving metrics: OM grew to 21.7% from 19.6% last Q2, NM grew to 19.6% from 18.9% last Q2 and FCFM grew to 22.1% from 19.2% last Q2. Notably, they reduced their S&M expenses, not only as a percentage of revenue, but also sequentially, which is the first time they did this since FY20. At the same time they increased their R&D expenses by 10% sequentially to 16.2% of revenue, which is up from 15.2% in Q1 and 14.8% in the last Q2. This led to an overall reduction of operating expenses as a percentage of revenue to 58.7%, which is down from 59.2% in Q1 and 61.4% in the last Q2. So far so good …
Overview of how Zscaler performed versus my expectations:
- Revenue expectation: $656M (4.5% QoQ, 25% YoY), expectation from billings model and 3.5% beat.
→ $648M (3.2% QoQ, 23.4% YoY), a 2.2% beat. - Q3 new revenue guide: $666M (1.5% QoQ, 20% YoY) which I would interpret as $686M (4.5% QoQ, 24% YoY) as my expectation from billings model, assuming Q2 QoQ billings growth of 46% (seasonal!).
→ $666M (2.8% QoQ, 20.4% YoY), which I now interpret as $679M (4.8% QoQ, 22.8% YoY), given the Q2 billings below. - I would like to see Q2 billings of around $754M.
→ $743M (44% QoQ, 18% YoY). - I would like to see RPO growth of around 3.2% QoQ (to $4.55b) and cRPO of about $2.23b.
→ RPO 4.6% QoQ to $4.62b and cRPO 4.6% QoQ to $2.26b. - I would like to see >100k ARR customer growth around 3.3% QoQ (~105 net adds).
→ 4.0% QoQ (126 net adds). - I would like to see >1M ARR customer growth around 4.8% QoQ (~28 net adds).
→ 6.0% QoQ (35 net adds). - I would like to see an operating income around $148M (22.6% margin).
→ $140M (21.7% OM, up from 19.6% last Q2). - Thoughts from previous Q: Ben’s Portfolio update end of December 2024
Crowdstrike:
Key insights:
- Revenue in-line with my expectations and at the higher end, signaling abating July 19th incident impact. Growth to likely settle in the 23% range based on new FY guide.
- ARR, in particular net new ARR also showed a strong reversal in the trend signaling recovery.
- While NRR dropped, all other secondary growth metrics demonstrated strong traction with customers:
- Gross retention stayed at 97%.
- RPO grew 20% QoQ and 41% YoY, up from last Q4’s 37%, fueled by 81% YoY growth in backlog.
- Multi product expansion kept going up (1% in each cohort), even for cohorts that grew 2% last Q instead of the typical 1%.
- Profitability metrics start to recover after having been impacted strongly in Q3.
Crowdstrike reported Fiscal Q4 2025 on 3/4/25 and this was the second full quarter after their infamous incident last July. So this quarter’s numbers will give us a great view on how the incident is continuing to impact their numbers and narrative. Let’s have a look.
Revenue came in at $1059M (4.8% QoQ, 25.2% YoY). In my last write-up I had laid out two scenarios, one in which I saw them more impacted by the incident and one in which I saw them less impacted by the incident. The revenue range spanning these two scenarios was $1048M to $1062M, so they almost reached the top end of this range, which to me is a good sign that the impact is much lower than many feared after the incident.
Going forward I expect their revenue growth rate to settle in the 23% range in the near term, which would be consistent with their new FY guide of 21.5% YoY growth. Also promising is their ARR development which was hit hard last Q as net new ARR dropped by 30% QoQ and dropped by 31% YoY. This Q, net new ARR was up a record 46.6% QoQ, recouping some portion of last quarter’s drop and giving further confidence that the incident impact will be temporary.
Secondary growth metrics met or exceeded my expectations throughout with one exception: NRR dropped to 112% (Q1: 119%, Q2: 118%, Q3: 115%, Q4: 112%). After repeatedly talking in the scripted part of the call how they are happy with their NRR, an analyst pressed them on the decline and this was their response:
“there’s a few dynamics that are impacting, obviously dollar based retention, obviously, our CCP had an impact. But remember, DBNR is a noisy metric for us. As you know, we don’t manage to do it. In any given quarter, we can land bigger, longer deals which does put pressure on our dollar-based retention. George talked about what Flex does to that environment. Flex gives us the opportunity to enter into larger, longer deals, which could impact DBNR, but that’s a good thing for us. We want customers to engage with us with bigger deals, longer deals. That’s exciting. Conversely, we now have a bigger base to sell into. We have this opportunity to go after more logos. So, on any given quarter, we’re going to get different dynamics and different pressures. But I think the good news is, we’ve got a lot of room with respect to new logos, and we’ve got this ever expanding base where we can sell into an upsell and cross-sell. So, that’s how we look at that dynamic.”
There are three other metrics that support the thesis that they are doing fine with customers despite the declining NRR:
- First, their gross retention remained at a high 97%, which in my mind is the even more important metric following the July incident.
- Second, their RPO grew 20% QoQ and 41% YoY, up from last Q4’s 37%. This growth was fueled mainly by an increase in backlog which grew 81% YoY to $2.8b with total RPO of $6.5b. cRPO grew 25% YoY in-line with revenue growth.
- Third, multi-product expansion grew by 1% QoQ in all four customer cohorts using 5+, 6+, 7+ and 8+ products. This is especially remarkable because in Q3 it grew by 2% in the 6+ and 7+ cohorts, so I had expected it to be flat this quarter just because they have typically only added 1% each quarter.
Finally, operating and net margins have started to recover after being impacted strongly last Q. OM was 20.5%, up from 19.3% in Q3 (23.5% in Q2 and 25.2% last Q4) and NM was 24.7%, up from 23.2% in Q3 (27.1% in Q2 and 27.9% last Q4). FCF margin stayed flat at 22.7% (22.8% in Q3, 28.2% in Q2 and 33.5% last Q4).
Overview of how Crowdstrike performed versus my expectations:
- Revenue expectation: $1062M (5.1% QoQ, 25.6% YoY), implying a 3.0% beat this Q.
→ $1059M (4.8% QoQ, 25.2% YoY), a 2.6% beat. - Q1 new revenue guide: $1115M (5% QoQ, 21% YoY) which I would interpret as $1147M (8% QoQ, 25% YoY), assuming QoQ growth will accelerate.
→ $1004M (4.2% QoQ, 19.8% YoY), which I now interpret as $1132M (7.0% QoQ, 22.9% YoY), implying a 2.6% beat. - Net new ARR of more than $200M (31% QoQ and ARR +5% QoQ).
→ $224M net new ARR (47% QoQ and ARR +5.6%, growing 23.5% YoY.) - I would like to see around $6.29b RPO (16.5% QoQ, 36.8% YoY); cRPO around $3.59b (57% of RPO, 30% YoY).
→ RPO $6.5b (20.4% QoQ, 41.3% YoY); cRPO $3.45b (11.9% QoQ, 24.8% YoY). - I would like to see NRR greater or equal to 115%.
→ 112% NRR. - I would like to see about $215M operating income.
→ $217M operating income. - I would like to see about $246M net income.
→ $261M net income. - I would like to see no multi-product customer decline.
→ 5+: 66% → 67%, 6+: 47% → 48%, 7+: 31% → 32%, 8+: 20% → 21%. - I would like to see gross retention close to 97%.
→ 97% gross retention. - I am looking for an initial upper FY26 revenue guide of $4.79b - $4.87b (21% - 23% YoY). For comparison, their initial FY25 guide they gave in Q4 of FY24 was 30.5% YoY.
→ 4.806 (21.5% YoY). - Thoughts from previous Q: Ben’s Portfolio update end of December 2024
Axon:
Key insights:
- All metrics met or exceeded my expectations.
- Revenue growth will likely be durable in FY25, based on guide. ARR growth and RPO confirm this and show potential for slight acceleration.
- Surprisingly Taser is currently growing faster than Software and Sensors (it was the opposite until recently). Since especially software and AI is a big part of the investment thesis, I’d like them to meaningfully re-accelerate in Software and Sensors going forward.
- Profitability was strong this quarter, with record FCF and net margins, but a slight dip in EBITDA margin.
Axon reported Fiscal Q4 2024 on 2/25/25 and they seem to be on track with all their reported metrics. Revenue grew to $575M (5.7% QoQ, 33.6% YoY), in-line with my range of expectations from $573M - $582M and beating their guide by 1.8%. Notably, YoY growth reaccelerated back from a dip in Q3 at 31.7%.
We also got the first new FY25 guide at 27.2% YoY growth, which exceeded my expected range of 24% - 26%. For comparison, their initial FY24 guide they gave in Q4 of FY23 was 24.1% YoY and they ended up delivering 33.4% YoY growth in FY24. So if we take into account that their initial FY guidance beats have come down every year for the last 3 years (FY22 beat was 14.4%, FY23 beat was 9.1% and FY24 beat was 7.3%), I would expect them to beat their new guide by around 5% - 6%, which would mean that they would have roughly durable revenue growth in FY25 at around 33% to 34%.
ARR has been a very lumpy metric for Axon with net new ARR QoQ increases and contractions all over the place. For example net new ARR in 1Q24 was very strong, growing $93M, only for it to drop to $25M in Q2 and $35M in Q3. So I was very happy to see a record net new ARR this Q4, with $116M (the second largest ARR add in their history was the $93M in Q1). This resulted in total ARR to grow 36.7% YoY, significantly faster than revenue growth and supporting a thesis of at least revenue growth durability, if not slight acceleration going forward.
Looking deeper into what drove revenue growth this Q, I was surprised to again see relatively strong numbers for Taser revenue. Remember, Q3 was a positive outlier for them due to extra supply and so while Q4 has been down QoQ or flat I thought it was great that they could maintain their strong Q3 revenue in Q4 ($221M, just as in Q3). This led them to actually accelerate YoY Taser revenue growth to 37.1%, up from 36.4% in Q3. Software and sensor revenue was good, growing 9.&% QoQ, after recovering from a dip in Q3 where it only grow 5.2% QoQ. Still, with Software and Sensor revenue growing 31.6% YoY in Q4, Taser was pulling the majority of the load at 37.1%. This is surprising, because Software and Sensor revenue has grown much faster than Taser revenue in the last couple of years. So while it is great to see the strong traction in Taser, I would like to see more strength going forward in the Software and Sensor segment, where they grew 54% in FY22 and 44% in FY24, compared to Taser revenue of 22% in FY22 and 15% in FY23.
Axon also re-defined their RPO metric, which they now call future contracted bookings and those numbers continue to show a positive trend: $7.1b → $7.0b → $7.5b → $8.2b → $10.1b (23.2% QoQ, 42.3% YoY, 20-25% cRPO). NRR stayed also very strong, at 123%, a rare number for any company in today’s environment.
Finally, net margin was exceptionally strong, at 29.3%, up from 19.8% last year and 20.8% in Q3. So was FCF margin at 39.4% , up from 28.1% a year ago and 12.5% in Q3; both record margins. At the same time adjusted EBITDA margin was down to 24.6% from Q3 of 26.7%, but up from 21.2% a year ago. Overall, everything looks on track here.
Overview of how Axon performed versus my expectations:
- Revenue expectation: $582M (6.9% QoQ, 34.7% YoY), implying a 3% beat; (I am a bit unsure what to expect in terms of revenue for Q4, but have penciled in $573M (5.4% QoQ, 32.7% YoY) at the low end and $582M (6.9% QoQ, 34.7% YoY) at the high end, which would be fantastic. This range would imply a 1.5% to 3% beat of their Q4 guide which they just gave in this Q3 report.)
→ $575M (5.7% QoQ, 33.6% YoY), a 1.8% beat. - Q1 revenue expectation: $620M (6.5% QoQ, 35% YoY), assuming similar QoQ growth as last Q1. Note: they don’t give quarterly guides besides for Q4s.
→ updated expectation: $615M (7.0% QoQ, 33.8% YoY). - I would like to see greater or equal to $62M net new ARR.
→ $116M net new ARR ($1b total ARR growing 13.1% QoQ, 36.7% YoY). - I would like to see RPO around $9.2b.
→ RPO metric was re-defined: $7.1b → $7.0b → $7.5b → $8.2b → $10.1b (23.2% QoQ, 42.3% YoY, 20-25% cRPO). - I would like to see NRR around 123%.
→ 123%. - I would like to see adjusted EBITDA around $145M.
→ $142M. - I am looking for an initial upper FY25 revenue guide of $2.59b - $2.63b (24% - 26% YoY). For comparison, their initial FY24 guide they gave in Q4 of FY23 was 24.1% YoY.
→ $2.65b (27.2% YoY). - Thoughts from previous Q: Ben’s Portfolio update end of December 2024
Wrap up
In case you missed it, here is a link to my earnings recaps of Cloudflare, Monday and Datadog: Ben’s Portfolio update end of February 2025, which is a timely read as they are about to report again soon. I’ll try to squeeze in an analysis of the last Samsara and Snowflake reports next time. Overall, I was happy with the earnings reports of Zscaler, Crowdstrike and Axon, which I covered here and we won’t have to wait long to get their next sets of numbers. While it’ll be interesting to see any revisions of their FY guidance in light of the current macro environment, it’ll be even more important to see if the Q1 numbers they are going to report meaningfully change the investment thesis.
I hope you are all having a great April!
Ben
Past recaps
July 2022: Ben’s Portfolio end of July 2022 - Saul’s Investing Discussions - Motley Fool Community
August 2022: Ben’s Portfolio end of August 2022 - Saul’s Investing Discussions - Motley Fool Community
September 2022: Ben’s Portfolio update end of September 2022
October 2022: Ben’s Portfolio update end of October 2022
November 2022: Ben’s Portfolio update end of November 2022
December 2022: Ben’s Portfolio update end of December 2022
January 2023: Ben’s Portfolio update end of January 2023
February 2023: Ben’s Portfolio update end of February 2023
March 2023: Ben’s Portfolio update end of March 2023
April 2023: Ben’s Portfolio update end of April 2023
May 2023: Ben’s Portfolio update end of May 2023
June 2023: Ben’s Portfolio update end of June 2023
July 2023: Ben’s Portfolio update end of July 2023
August 2023: Ben’s Portfolio update end of August 2023
September 2023: Ben’s Portfolio update end of September 2023
October 2023: Ben’s Portfolio update end of October 2023
November 2023: Ben’s Portfolio update end of November 2023
December 2023: Ben’s Portfolio update end of December 2023
January 2024: Ben’s Portfolio update end of January 2024
February 2024: Ben’s Portfolio update end of February 2024
March 2024: Ben’s Portfolio update end of March 2024
April 2024: Ben’s Portfolio update end of April 2024
May 2024: Ben’s Portfolio update end of May 2024
June 2024: Ben’s Portfolio update end of June 2024
July 2024: Ben’s Portfolio update end of July 2024
August 2024: Ben’s Portfolio update end of August 2024
September 2024: Ben’s Portfolio update end of September 2024
October 2024: Ben’s Portfolio update end of October 2024
November 2024: Ben’s Portfolio update end of November 2024
December 2024: Ben’s Portfolio update end of December 2024
January 2025: Ben’s Portfolio update end of January 2025
February 2025: Ben’s Portfolio update end of February 2025