So times are tougher for some, but for the most part, not in leaders in Cloud security. Cloudflare is a great example.
While it saw some slowdown last year, it’s now accelerating again with 2 record quarters of new bookings in a row.
At ~ $1.5 Billion in ARR, it’s still growing 32% and it’s gotten pretty darn efficient, with 14% free cash flow margins now.
And the markets really like Cloudflare. Really, really like it. It’s trading at a stunning $36 Billion market cap, or 24x ARR!
The key? They are seeing no slowdown at all in revenue growth from $100k+ customers.
5 Interesting Learnings:
#1. $100k+ Customers Are Key To Growth at Scale. Revenue There Growing a Stunning 64% (!).
Cloudflare is getting more and more enterprise, but bear in mind that’s at $1.5 Billion in ARR. It hasn’t left its free and smaller customers behind. But the big ones are growing fast faster by revenue at scale. They’ve also now crossed 2,750 $100k+ customers and 100 $1m+ customers.
#2. 3,063 Employees — So About $400,000 in Revenue Per Employee
This is the age of New Efficiency. Public SaaS and Cloud companies now average $400,000 in revenue per employee, and many of the most efficient leaders are at $400,000 or higher. Add Cloudflare to that club.
#3. NRR Has Come Down From 2 Years Ago, But Stable Now At 115%
Cloudflare hasn’t been immune the past 24 months from customers looking to optimize their Cloud spend, so NRR has come down from where it was 5+ quarters ago. But it’s been stable since at 115%.
#4. Gottom Much More Efficient — But Still in Investment and Growth Mode
Cloudflare has gotten much more efficient than where it was 2-3 years ago, like almost every SaaS and Cloud leader. In 2021, it’s non-GAAP operating margins was -1%. Today? +9%. That’s much, much more efficient.
But for now, they aren’t pushing all the way to 20%+ margins. They’re still trading off some margin expansion to invest in growth. And the markets are good with that.
Efficient Growth. Just not the hyper-efficiency we see of some whose growth is slower.
#5. 48% of Revenue From Outside the U.S.
This isn’t new, but a good reminder to go as global as your product allows.
And a few other interesting learnings:
#6. First $30m TCV New Deal and First $60m (!) Total TCV Renewal.
Cloudflare really scales into some big deals! That $60m total TCV customer started with one $60k deal.
#7. A $6.6 Million Dollar Deal They Just Closed — They Lost on the First RFP
A great reminder to not give up on lost deals. You often get another chance if you’re patient!
#8. Finally, I really like Jamin Ball’s chart of their new bookings here. You can see Cloudflare’s re-acceleration clearly:
Wow, Cloudflare. It doesn’t get much better.
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Jason Lemkin, Khareem Sudlow
