Cloudflare Earnings Preview

Cooling Adoptions Offset by Spend 'Increases' from Existing Customers

Andrew Licini | ETR Research  

| July 28, 2022

Cloudflare's CEO made cautious comments earlier this month at a Software Conference, particularly around potential lengthening of sales cycles (a growing trend among tech CEOs). The company, which has seen its stock drop more than 60% YTD, is slated to report earnings on Thursday, August 4th after the market close. Ahead of the report next week, we turn to ETR's 2H22 data to see if customer sentiment matches management commentary.

Net Time Series JUL22
Image Credit: Net Time Series JUL22

As the data visualization chart above illustrates, Cloudflare's survey Net Score (ETR's proprietary measurement for forward-looking spending intentions) is slightly up from one year ago, as fewer planned adoptions are offset by a larger portion of existing customers planning to 'Increase' spend; 38% of Cloudflare customers in our sample plan to increase spend in 2H22 compared to 32% back in 2H21 (N=202). Meanwhile, negative spend plans for Cloudflare remain minimal with just 3.3% of customers in our sample planning to 'Decrease' or 'Replace' Cloudflare in 2H22 compared to 5% in 2H21.

NET Respondent Subsample JUL22
Image Credit: NET Respondent Subsample JUL22

When breaking out Cloudflare's Net Score by customer subsamples, we see that large organizations (as depicted above by the Global 2000 Index cut) show the largest acceleration in spend (N=45). By industry vertical, Retail/Consumer and IT/Telco organizations are also bright spots for the vendor.

NET vendor positioning JUL22
Image Credit: NET vendor positioning JUL22

In addition, Cloudflare's Pervasion (i.e., ETR's proprietary measurement of citation growth) in our sample continues to expand across virtually all customer subsamples:

  • Networking Sector: 6.0% JUL20 → 9.7% JUL21 → 11.9% JUL22
  • Information Security Sector: 7.5% JUL20 → 11.2% JUL21 → 18.4% JUL22
NET Forecast JUL22
Image Credit: NET Forecast JUL22

Lastly, we take a look at ETR's proprietary Sales Forecaster model (a premium data tool reserved for ETR master clients) which attempts to predict whether reported sales will beat, miss, or be in line with the median analyst estimate using data from our surveys and historical trends.

Here we see that ETR's model predicts that Cloudflare's reported sales will be $240M for the quarter ending 6/30/22 (57.6% y/y growth) versus the median analyst estimate of $227M (49.1% y/y). ETR's model has a high Confidence Score of 91 for this forecast.

If you would like to take a deeper dive into Cloudflare's most recent data report, you can view it on the ETR platform HERE, or sign up for a free trial HERE to get started with ETR's broad universe of enterprise technology research.

Enterprise Technology Research (ETR) is a technology market research firm that leverages proprietary data from our targeted IT decision maker (ITDM) community to bring you actionable insights about spending intentions and industry trends. Since 2010, we have worked diligently at achieving one goal: eliminating the need for opinions in enterprise research, which are often formed from incomplete, biased, and statistically insignificant data. Our community of ITDMs represents $1+ trillion in annual IT spend and is positioned to provide best-in-class customer/evaluator perspectives. ETR’s proprietary data and insights from this community empower institutional investors, technology companies, and ITDMs to navigate the complex enterprise technology landscape amid an expanding marketplace. Discover what ETR can do for you at