While I totally agree with this, it’s worth noting that Cloudflare just barely beat their estimate in Q4. If the quarter was one day shorter, they would have missed the estimate and we would be having a different conversation. I’ll emphasize that I’m also trusting management here, but simply worth considering.
My best guess is that their “top down” sales motion is going well, and hence the renewal rates that they’re modeling for that customer cohort are better than those being modeled for their SMB cohort.
We know from Bill’s (and other SaaS) Q4 reports that SMBs are being strongly affected by the current climate.
We also see some evidence of this in Cloudflare’s report, notably with >$100k customers now representing 61% of revenue. The revenue contribution from this cohort grew at 67%, meaning that the small (<$100k) customer cohort (39% of revenue) grew at 27%.
Therefore, if we assume that the large customer cohort grows at 60% next year, and the small cohort grows at 24%, that would put Cloudflare’s FY’23 revenue at $1,422 (6% higher that their initial guide).
I don’t think management would risk being so close to missing an estimate. I’m projecting it to be a little higher, and from there I could see the scenario in which the bigger contracts (as indicated above) pull the sequential revenue growth a little higher.
-RMTZP
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