Hi Ant!
I haven’t read the Zscaler transcript yet, nor have I had time to dig deeper into their numbers, but two things have been bugging me about Zscaler in this and the previous earnings report (since the new CFO joined):
First, last quarter they stopped guiding for billings, and this quarter they stopped reporting them entirely; in fact, the word ‘billings’ wasn’t mentioned a single time on the conference call. Yet, we know that for Zscaler, billings is an excellent leading metric for future revenue growth. Okay, fine, the new CFO thinks ARR is a better metric to guide for, but they should at least keep reporting billings. Other companies, like DDOG, still report billings even though it doesn’t correlate as well with their future revenue.
Second, I still need to verify this, but they have made several acquisitions recently that potentially add significant inorganic revenue and customer numbers. However, they apparently refused to break out any financial details that would allow us to calculate organic growth, even though several analysts have been asking about organic growth in the cc.
Regarding Cloudflare: I remain unconcerned about the outage mentioned in my recap. Service interruptions are an industry-wide reality, not a Cloudflare-specific failing. Beyond the reliability premium I discussed above, a three-hour outage creates only an immaterial, temporary revenue dip. It is highly unlikely that enterprise customers would incur switching costs to move to a competitor over a brief disruption that could just as easily impact any other provider.
Cheers and thanks for all the feedback!
Ben