I have a simply worded question about NET. Why are its revenues as low as they are?
Here is the longer version.
Raging bull case: NET offers a bunch of great products and, chiefly, has the potential to rival AWS by packaging private networking with zero trust security and thus supposedly the sky is the limit. If I get this correctly, the customer gets the best of both worlds: a decentralized and global yet also private and secure network. The market seems to agree considering how it prices NET.
But its revenue in Q2 was just 152 mln for 53%. The company seems to be firing on all cylinders but its operating performance and FCF trail the leaders.
Meanwhile, ZS is not fancy on the social media, lacks a flashy CEO, and is known for one thing. Supposedly, NET offers an equivalent zero trust alternative as just one of its so many excellent products.
Yet, “one-trick pony” ZS brought in 197 mln at 57%, generating positive non-Gaap operating income and positive FCF while also increasing its product offerings/revenue streams.
Jay Chaudhry suggests that CDNs are trying to expend simply because their core business is commoditized. “…lately Cloudflare has been making noise. I am yet to see them in any meaningful view in the field…it is a tough area for them [CDNs, including Akamai], very different architectural position…” He is a lot more annoyed at legacy vendors repackaging legacy solutions as pseudo ZT and keeping their customers than he is worried about NET.
https://kvgo.com/citi-global-technology-conference/zscaler-i… at around 34-35 min mark.
Why is NET not growing faster off what is a pretty small base considering its plethora of products?
Is that because its legacy revenue lines are essentially worthless from a high-growth investor perspective?
I am a non-techie and I am not arguing or disputing the potential of NET. I am simply trying to grasp why the market trusts NET as much as it does. For example, I trust TWLO 2.0 which the market currently ignores because I saw what TWLO 1.0 managed (4X what NET did on the basis of something that sounds pretty meh to a non-techie). So if TWLO 2.0 wants to bundle first party data with marketers and developers, ok. They are growing pretty well just on the basis of the legacy product. They surely beat NET in every one of the last three quarters off a much higher base.
Does a company that brings in only 150 million in a quarter really have the capability of launching a plethora of supposedly groundbreaking products one after the other? Shouldn’t a CEO be focused on the best and greatest opportunity instead of worrying about my email or the Sears Tower?
Alexander the Great did conquer the AWS of his day with a tiny force but he kinda proceeded one battle at a time