How did Cloudflare do versus my expectation? (Laid out here: Ben’s Portfolio update end of July 2023)
- Reporting Fiscal Q2 2023 on 8/3/23.
- Revenue expectation: $307M (6% QoQ, 31% YoY), hoping that the beat will improve from 0% last Q to 0.7% this Q.
—> They managed $308.5M (6.3% QoQ, 31.5% YoY), exceeding my expectation.
- Q3 new revenue guide: $325M (6% QoQ, 28% YoY) which I would interpret as $328M (7% QoQ, 29% YoY) expecting 1% more QoQ growth as previous Q.
—> They guided for $330.5M (7.1% QoQ, 30% YoY), exceeding my expectation.
- I would like to get an update on three topics: a) Sales/GTM issues b) their “$5B in 5 years” goal c) their AI angle.
—> have only listened to part of the call so far, but regarding
a) “Our focus on go-to-market improvements is already paying off. (…) our improved execution led to a record quarter in new ACV bookings. (…) As we discussed last quarter, we made significant changes in our sales team to proactively address underperformance. That went very well, both qualitatively and quantitatively. Our top performers are invigorated. We saw a marked improvement in the average account executive productivity. At the same time, we’ve implemented robust onboarding, enablement, and training programs. Combined with the record number of applicants we’re seeing for sales roles, this makes for the right formula to build a world-class sales organization. And our team is armed with great products to sell.” This sounds very good and optimistic which I think is justified by the numbers they just delivered.
c)“Our innovation engine remains in high gear, and by our estimates, Cloudflare is the most commonly used cloud provider across leading AI startups. In the second quarter alone, we shared ten major announcements and features to extend Cloudflare Workers as the preeminent development platform built for the age of AI. We believe we’re uniquely positioned to become a leader in AI inferencing and have a lot more in store across the entire AI lifecycle to help enable companies to build the future.”
- I would like to see clear signs that revenue growth will start re-accelerating again in 2H.
—> The Q3 revenue guide clearly indicates this - great!
- I would like to see large customer QoQ re-acceleration.
—> large customer growth jumped to an amazing +9.1% QoQ growth, up from 5.6% last Q (196 new large customers up from 114 last Q).
- I would like to see continued, good profitability margin progress.
—> looking good: operating income margin stayed at 6.6%. Net income margin jumped to a record 11%, up from 0% last Q2 and 9% last Q. FCF margin went to 6%, up from -2% last Q2 and 5% last Q. - check
- I would like to see RPO QoQ growth re-accelerate.
—> RPO growth jumped from 5.7% QoQ last quarter to 8% QoQ this quarter. -check.
- Detailed thoughts: Ben’s Portfolio update end of April 2023 And here: Ben’s Portfolio update end of May 2023
overall, I would say well done, Cloudflare!