Cloudflare's management commented they didn't see fewer deals but longer deal negotiations and more ramp-ups over time instead of going for the full suite option from the start. Everybody and their aunt now thinks we will go into a recession later in the year and that's why companies spend less. That's the law of big numbers in investing.īut there is also a significant impact of the macro environment. Size because the bigger you get, the more difficult it is to keep growing at the same percentage rates, even if the dollar growth is much higher. There are two main reasons for the slowdown: size and the macroeconomic environment. As you can see, this is the third quarter in a row revenue growth has decelerated. This is a graph I made about Cloudflare's revenue growth per quarter. That means Cloudflare now guides for 31% to 32% revenue growth for the year. The consensus for FY 2023 stood at $1.33 billion in revenue, but Cloudflare now guides for revenue between $1.28 billion and $1.284 billion. Cloudflare lowered its guidance for the second quarter and the full year.įor Q2, Cloudflare now aims at $305 million to $306 million, while the consensus stood at $319.97M. It's almost a law of nature in investing: a growth stock priced at a premium that misses revenue estimates will crash hard, even if the miss is just tiny.īut there's also a second and a third reason for the big drop. Algorithms trade on earnings misses, especially for highly valued growth stocks. That's still remarkable growth in my book, but the headlines show that Cloudflare missed the consensus by $0.6M or 0.2%. Revenue came in at $290.2 million, up 36.8% year-over-year.įrom Cloudflare's Q1 2023 earnings slides deck Was this drop warranted? And does this quarter affect the long-term thesis? We will evaluate that in this article. If you are a Cloudflare shareholder, you have probably noticed that the stock dropped like a rock since then, down 31%. Last Thursday, after the market close, Cloudflare ( NYSE: NET ) announced its Q1 2023 earnings. "I want every dollar we put into Cloudflare to be more productive at driving revenue, profit and shareholder value." - Matthew Prince, Founder and CEO of Cloudflare on the conference call.
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