As many of our companies prepare to report their Q1’2021 results, the purpose of this post is to provide a high-level preview of how these earnings can unfold based on the leading indicators that we have. Hopefully this is useful to have on what is arguably the first pandemic-lapped quarter that our companies will report.
Pt. 1 – IaaS Results (Q1’2021)
Q1 revenue was $13.50B (32% YoY growth), higher than the consensus expectation of $13.23B. Notably, this was an acceleration from the 28% YoY growth that was reported last quarter.
“During COVID, we’ve seen many enterprises decide that they no longer want to manage their own technology infrastructure. We expect this trend to continue as we move into the post pandemic recovery. There’s significant momentum around the world, including broad and deep engagement across major industries.”
We’re seeing great usage and expansion (on AWS) across a number of industries and a number of types of customers from start-ups all the way to enterprises. To put it little bit in perspective for you, in Q1 of 2019, we were at $31 billion run rate. This year, we’re up to a $54 billion annualized run rate. Percentages can be a little deceiving, I would encourage you to look at the absolute dollar growth.”
Microsoft does not reveal Azure-specific results; however, “intelligent cloud” revenue was $15.12B (23% YoY growth), higher than the consensus expectation of $14.9B. Microsoft did reveal that Azure grew at 50% YoY though, which was the same growth rate as last quarter.
“If you look at some of the challenges like the Hafnium (cyber incident) the cloud was not impacted…any business that had moved already to the cloud had none of those issues. So therefore, I think we are going to see increased cloud adoption. We’re going to see increased usage of end-to-end security suites…with zero trust architecture.”
“Over a year into the pandemic, digital adoption curves aren’t slowing down. In fact, they’re accelerating and it’s just the beginning. Digital technology will be the foundation for resilience and growth over the next decade. We are innovating and building the Cloud stack to accelerate the digital capability of every organization on the planet.”
Q1 revenue was $4.05B (46% YoY growth), lower than the consensus expectation of $4.07B. Again, this was a slight acceleration from the 47% YoY growth that was reported last quarter.
"(As it relates to the harder hit industries) I think the main thing we’d want to leave you with is that we are seeing, in part, an acceleration in the shift to digital”
“We’re seeing very strong customer momentum in the data cloud…we are also seeing customers wanting a robust infrastructure cloud in order to create operational efficiencies and reduce IT cost”
A Quick Digression
It is worth noting that AWS, Azure, and GCP cumulatively added approximately 6,832 million in revenue in one year, with operating margins of ~30%. To put it into context, these three cloud providers combine for an annualized run rate of ~$100 billion. There has never been a business model as incredible as this in history – and I’m sure in the future, this cloud era will be studied as the industrial revolution was.
Pt. 2 – Expectations
Here is the guidance that some of the most followed companies on the board provided, together with their average beats.
Company Earnings Date Revenue Guidance Average Revenue Guidance Beat Crowdstrike TBD 62% 6.2% Datadog May 6 42% 6.9% Cloudflare May 6 43% 5.4% Docusign TBD 46% 4.2% Zoom TBD 175% 16.9%* (9.1% ignoring three Covid-peak quarters) Snowflake TBD 94% N/A Twilio May 5 46%** 8.6% Okta TBD 31% 6.6% ZScaler TBD 48% 5.7% Zoominfo May 3 37% 6.0%
*9.1% ignoring the three Covid-peak quarters
** Includes inorganic growth (Segment acquisition)
Pt. 3 – Valuation Changes
I understand that there are different schools of thought in this board in regards to how much valuation matters, but the purpose of the table below is simply summarize how the value of these companies has shifted over the past ~15 months.
Company 2/18/2020 EV/S (NTM) 4/30/2021 EV/S (NTM) Crowdstrike 19x 32x Datadog 26x 29x Cloudflare 13x 40x Docusign 13x 21x Zoom 27x 23x Snowfla ke N/A 50x Twilio 11x 23x Okta 22x 30x ZScaler 17x 32x Zoominfo N/A 16x
Pt. 4 – Market Sentiment
Although this is not necessarily a leading indicator, this is once again meant to provide some context in regards to how the share prices of these companies have changed over the past few months.
Company Since Last Earnings YTD Crowdstrike +8% 0% Datadog -26% -11% Cloudflare -7% +12% Docusign 0% +1% Zoom -21% -4% Snowflake -5% -17% Twilio -9% +10% Okta +13% +8% ZScaler -4% -5% Zoominfo +1% -2%
I hope that this is somewhat useful context as earnings season is right around the corner, and I welcome any thoughts regarding other factors that have not been included here.
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