Since I was the one who was wondering what we were missing, I decided to go ahead and summarize the various ideas people had to explain what it was that explained the big rise. These are all abbreviations of what the authors wrote, with some slight paraphrasing. I really appreciate everyone who contributed.
There were also a few posts saying essentially that “You ought to get out!” but that’s not what I was looking for, I was looking for “Why is the stock continuing to rise?”
Well, here’s my summary of what you all wrote. That was true crowd-sourcing!
Thanks to you all!
One, the announcement of Cloudflare R2 Storage. AWS charges an egress fee every time a company takes data out to analyze it or whatever (That serves to lock the data in once it’s there). That will be free on Cloudflare! This could save companies a huge amount of money. Because there are no transfer fees, developers can change how applications are designed. Cloudflare has other tools in this update that will improve performance while reducing fees.
One A, The reason is in plain sight. I believe it’s because of the new product offering: R2 public cloud data storage. The market for public cloud is massive. It’s like Cloudflare just started a new company with minimal cost. All new services run on existing servers.
R2 is to disrupt AWS. The bandwidth cost has declined substantially over the past 2 decades but AWS kept most of the saving to itself and has a fat margin. Cloudflare R2 storage is simply passing the saving on to customers. So what AWS is going to do?
If Cloudflare succeeds taking some share from AWS, it can take share from Google Cloud, Microsoft Azure too. Also the market keeps expanding and there will be new companies constantly being created.
Another point to think about: customers like having choices. They don’t like being locked into a quasi-monopoly. Some people will switch for the sake of switcing/dislike of big AWS.
With additional revenue from R2 storage, I see Cloudflare revenue starting to accelerate in the next few quarters. The market is forward looking. The stock didn’t go up 60% in month just for the emotions.
“The global Content Delivery Network (CDN) market size is expected to grow from USD 14.4 billion in 2020 to USD 27.9 billion in 2025, at a Compound Annual Growth Rate (CAGR) of 14.1%” - marketsandmarkets
“Cloudflare has taken the CDN model, added a wide range of enterprise Network as a Service (NaaS) features, and demonstrated it can scale.” - Forbes
Two, at the edge, their main competitor was Fastly, which is floundering.
Three, Cloudflare is investing in innovation and putting out dozens of new enhancements every month. It may not yet be accelerating growth, but it is potential.
Four, What we may be seeing is the collective confidence that Cloudflare is going to massively succeed.
Five, Cloudflare is a content delivery network (CDN). It places geographically distributed servers closer to your area that speed up the digital information transmission. How is this beneficial: speed, reliability (fewer outages), cost. Last rise in stock started on day that Facebook had a six hour outage.
Six, countries are putting up firewalls around their population (China, etc). Cloudflare has the solution for that (Jurisdictional Restrictions)
Seven, Cloudflare is getting the benefit of its CEO articulating the vision of becoming the 4th hyperscalar / cloud / IaaS company (after AWS, Azure and Google Cloud), and the delivery of R2 as first step to match that vision.
Eight, Cloudfares dominance in regards to reverse proxy…
“A reverse proxy is a layer between a web server and the rest of the Internet. It provides security and better performance. Your computer doesn’t have to connect to a single server”
Cloudflare currently does 18.4% of the entire internet in regards to reverse proxy. Second place is Fastly with ……1.7%, showing Cloudflare has an enormous lead. But the huge majority of sites, 77.2%, still don’t use a reverse proxy server service. Mind blowing!
Nine, The current move of Cloudflare in taking on Public Cloud players was HUGELY appreciated by the market. I guess the sentiment guesses that they will be a serious player in public cloud in the future. I also think that Cloudflare’s CEO is one of the best story tellers and sales-man CEOs around.
Ten, “The Edge” is an entire new layer/frontier of the Internet, with an essentially infinite TAM, and everyone else is flubbing their attempted conquests of it; Cloudflare is the only player who is executing well.
Usually you have the story first, and numbers follow if all goes well…in this case, we’ve had great numbers to this point, but the market is responding at this point to the emerging story. (Including that Cloudflare could be a AWS-killer).
Eleven, With Cloudflare Workers and a bunch of other services that Cloudflare is busy rolling out, there’s starting to be a strong economic incentive to move certain workloads to its platform. Data gravity is real; “where your data lives” is usually with the provider that starts to see a lot of your other workloads as well.
I work in a different area of Tech and “data is gravity” is a thing. If customers start migrating data to Cloudflare, then Cloudflare becomes a true competitor to Azure, AWS and GCP. The TAM becomes a lot larger and thus the opportunity for growth goes with it. I think that it is this speculation that is driving the stock price. Their is a pent up dissatisfaction with the public cloud vendors and Cloudflare is tapping into it.