Cloudflare announces 4Q '21 earnings

Looks just OK to me, all as expected, but they guided higher.

  • Revenue = $194M (+54% YoY) vs $185M est
  • EPS = $0 vs $0 est
  • Guided for +42% rev growth in 2022 (higher than the usual guidance they provide)

“We had a most excellent 2021, capping off the year with fourth quarter revenue growth up 54% year-over-year. The full year represented a 52% year-over-year increase in revenue growth and a 71% year-over-year increase in large customer growth. It was also the fifth straight year we achieved 50 percent, or greater, compounded growth,” said Matthew Prince, co-founder & CEO of Cloudflare. “Our continued success is fueled by a culture of relentless innovation on top of a highly scalable platform. That’s why we’re uniquely positioned to extend our network, introduce new Zero Trust capabilities, and grow our total addressable market. We’ve never been more motivated to take on this huge opportunity as corporate networks transition to the cloud, and developers line-up to build on our edge.”

Long NET


Stepping back a bit from the second-guessing of by how much our companies have historically beaten/will beat their prior growth guidance (which I find less relevant tbh as none of us represents the market’s view, so why bother with this game? Still, for completeness’ sake, they came in on the penny with what I was “expecting” fwiw - ”I’m pencilling in closer to $195m” - they came in at $194), let’s look at what is actually going on in the business?

I see the following:

The fastest annual and Q4 yoy growth in revenue of the last 4 years.

2017 - 18 : 43% full-year yoy | 43% Q4 yoy
2018 - 19 : 49% full-year yoy | 51% Q4 yoy
2019 - 20 : 50% full-year yoy | 50% Q4 yoy
2020 - 21 : 52% full-year yoy | 54% Q4 yoy

The first quarterly free cash flow positive result in the company’s history: $8.6m

Very strong, and improved margins with gross margin coming in at 79%, operating margin at 1% for the second quarter in a row - essentially planned to be around break-even - and net income positive. They are following the Amazon playbook.

Strong RPO growth and exceptional current RPO growth

  • RPO came in at $624m, which is up 14% qoq and 63% yoy
  • cRPO was $480m, up 17% qoq and 67% yoy which is an acceleration vs prior quarters and represents the highest proportion of run-rate revenue of the last 3 years, at 62% vs 57% in 2020 and 53% in 2019.

This is pretty significant as it’s essentially revenue already in the bag. So Cloudflare’s revenue in the bag is the highest it’s ever been as a % of what they did in the last quarter.

NRR the highest it’s ever been, at 125%, up 1%pt vs prior q and 6%pts vs a year ago.

Good customer growth and excellent large customer growth

Total customers grew 26% yoy to 140k, and ARPU was up 22% yoy continuing a steady multi-quarter upward march indicative of larger customer success.

Further proof comes from large customer numbers that they’ve broken out for the first time. Customers with ARR >$100k was up 70% yoy (to 1416), >$500k up 70% (to 121), and $1m up 75% (to 56).

Great traction with new products addressing adjacent, TAM-expanding markets

Zero trust, R2, email security all highlighted as having good customer traction with concrete numbers quoted: zero trust actual large customer wins highlighted, 200k domains signed up for email security, 9000 sign-ups for R2 beta.

Strong guidance for next year with room to beat and raise indicating a confident team executing very well.

They guided for $931m revenue for 2022, up 42% yoy which means they will in all likelihood breach $1bn in revenue next year, still growing at >50%. And they indicated that they will return to FCF positive territory in the second half of the year, after spending a bit more in the first half of the year.

Massive secular tailwinds and well positioned to capitalise on them: digital transformation, security, government. I think we all know these issues; no need to spell them out again. But suffice to say Cloudflare and the trust they seem to engender is exceptionally well placed to capitalise on these multi-year tailwinds.

Strong, founder-led team

Matthew Prince again impressed. The word that keeps on popping into my head is “headboy”. And I loved another description I read on SA calling him a master “humble-bragger”. Gotta love that. He’s good and knows how to market - to his customers, his employees and his investors, among others probably.

All in all therefore a consistent and steadily accelerating hyper-grower with an ever increasing TAM who has now reached the point of not burning any more cash. A great position to be in when you have $1.8bn of cash on hand for tuck-in acquisitions.

(Long NET)


Thanks WSM for a great distillation of what is going on in Cloudflare’s business. It certainly helped me put it together in my own head and you seemed to touch on all the important metrics. Even with its slight acceleration it still is the slowest growing of all my companies, but it sure is steady.