How Cloudflare Is Moving Upmarket With A New Leadership Team

Blockhead12-04

The technology prowess of Cloudflare (NET) has never been in doubt as the cloud service provider enjoys a reputation for speeding up and providing security for web applications routed through its ...

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But Cloudflare stock struggled with its go-to-market strategy. 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Where Cloudflare stock has struggled, however, has been its go-to-market strategy amid stiff competition.\nThis year, three new hirings aimed to put Cloudflare on the right track.\n\n\n\n↑\nX\n\n\n\n\n'I've Never Seen Conditions This Bullish In My Life': Hedge Fund Manager Jim Roppel\n\n\nSee All Videos\n\n\n\n\nNOW PLAYING\n'I've Never Seen Conditions This Bullish In My Life': Hedge Fund Manager Jim Roppel\n\n\n\n\nIn February, Cloudflare appointed Mark Anderson as president of revenue. Most recently the chief executive of privately held Alteryx, Anderson earlier served as president of cybersecurity firm Palo Alto Networks (PANW).\nIn March, Cloudflare named Stephanie Cohen, formerly a Goldman Sachs (GS) executive, as its first-ever chief strategy officer.\nThen in October, Cloudflare hired a former top ServiceNow (NOW) executive, Chirantan \"C.J.\" Desai, as president of product and engineering. He'll focus on research and development as well.\nCloudflare Stock: Quintupling Revenue\nMeanwhile, Cloudflare co-founders Matthew Prince, the CEO, and Michelle Zatlyn, chief operating officer, continue to run the company that was founded in 2009. With a new leadership team in place, Cloudflare aims to grow annual recurring revenue from $1 billion to $5 billion.\n\"My job and Matthew's job is to make sure we tilt the risk — the rate of risk and reward in the favor of reward. And so, (part) of that is hiring great leaders to help us in this next phase of journey,\" Zatlyn said at a recent RBC Capital financial conference.\nKey to Cloudflare's strategy is targeting larger companies. Currently, companies with over $1 million in annual contract value make up about 1% of the company's total customers.\n\"And so, we're on this path of $1 billion to $5 billion in revenue, which is an exciting path,\" Zatlyn said at the conference. \"As a founder, it's so different from going from $100 million to $500 million.\n\"Like it's just a totally different thing because you have multiple products, multiple customer segments, multiple geographies, huge opportunity,\" she went on to say. \"That's a lot more decisions for leaders to have to make. So, you have to bring in the right leaders.\"\nCloudflare Stock: AI Buzz\nMeanwhile, Cloudflare stock has advanced 20% this year amid investor buzz over its work in artificial intelligence and cryptocurrency.\nAlso, Cloudflare reported third-quarter earnings of 20 cents a share, up 25% from a year earlier. Revenue climbed 28% to $430.1 million, the San Francisco-based company said. Results modestly beat Wall Street estimates.\nAmid management changes, the company faces challenges, William Blair analyst Jonathan Ho said in a recent note to clients.\nIn the third quarter, Ho noted that Cloudflare \"was impacted by lengthening sales cycles and multiple large deals in North America slipping into the fourth quarter attributed to changes in sales leadership. The deals remain active or have subsequently closed, with Cloudflare experiencing sales productivity ramp and capacity increase over the next few quarters.\"\nHo added: \"We believe the issues around sales leadership transition, deal slippage, and capacity should resolve over the near term. The company is still retooling its salesforce to better engage with enterprise accounts and adding sufficient capacity to take advantage of significant opportunities ahead in AI, cybersecurity, and edge compute.\"\nIn edge computing, Cloudflare competes with Akamai Technologies (AKAM) and Fastly (FSLY). Edge computing extends cloud services closer to where data is generated. At the same time, Cloudflare is targeting AI \"inferencing\" — processing AI apps or workloads locally on the network edge, not in data centers.\n\nGenerative artificial intelligence has been a hot topic for investors since the emergence of ChatGPT maker OpenAI in late 2022. Further, Cloudflare has ties to OpenAI. Cloudflare provides secure links to cloud services when consumers sign up to use ChatGPT, a conversational chatbot.\nNvidia, Microsoft Partnerships\nAlso, Cloudflare has increased investments in AI infrastructure amid an alliance with chipmaker Nvidia (NVDA). Cloudflare has deployed Nvidia AI chips in its global network. The AI networking cards are plugged into computer server slots, lowering capital spending needs.\nIn 2023, Cloudflare announced its \"Workers AI\" platform and partnerships with Microsoft (MSFT), privately held Databricks and Hugging Face.\nOn Cloudflare's third-quarter conference call with analysts, CEO Prince said its cloud platform appeals to a wide range of software developers building artificial intelligence and other applications.\n\"If you look across the AI ecosystem, if you look across the sort of blockchain and cryptocurrency ecosystem, if you look across anywhere where someone is able to start with a blank slate, we're seeing adoption rates in the top startups,\" he said.\n'Serverless' Network For Developers\nPart of Cloudflare's strategy is based on views that more companies will shift away from cloud computing services from the likes of Amazon Web Services, part of Amazon.com (AMZN), in the long run. Instead, Cloudflare expects more cloud-based apps to be developed and deployed over its network.\nCloudflare calls its network \"serverless.\" That means developers can write and deploy code without having to worry about the physical infrastructure behind it.\nServers are still used, but a developer or company only pays for the resources that are actually used, rather than reserving and paying for a fixed number of servers, or needing to predict bandwidth. It's a generally cost-effective approach, Cloudflare contends.\nMeanwhile, Cloudflare is a relative newcomer to the crowded Secure Access Service Edge, or SASE, market. SASE cybersecurity tools protect remote workers and branch offices that access corporate networks via the public internet rather than virtual private networks, or VPNs.\nStiff Competition In SASE\nCloudflare competes with Zscaler (ZS), Palo Alto and many others in the SASE market. Acquisitions have boosted Cloudflare's SASE offerings. It acquired Area 1 Security for $162 million two years ago. In early 2024, it bought BastionZero.\n\"We believe Cloudflare can sustain, if not accelerate, topline growth over the next few years given multiple product cycles, improving sales execution and emerging tailwinds,\" Morgan Stanley analyst Hamza Fodderwala said in a recent note.\n\"Cloudflare is in the early innings of monetizing a broader, multiproduct platform across security, networking, AI and application services,\" Fodderwala added. \"This includes adoption of developer products, AI workloads, and enterprise SASE where share gains are improving.\"\nAnalyst Mauricio Sanchez at research firm Dell'Oro said in an email that Cloudflare has been a SASE share gainer.\n\"While they are far from a market leader (they have low single-digit market share versus the midteen share that top vendors like Zscaler possess), they did grow in 2023 at 64% versus the market average of 31%,\" Sanchez told Investor's Business Daily.\nHe added: \"Success is coming from smaller enterprises that are familiar with Cloudflare's application networking/security services and appreciate the end-to-end needs from user to application. However, they have a ways to go to be short-listed at the very large enterprise space where the likes of Zscaler and Palo Alto rule the roost.\"\nCloudflare Stock Technical Ratings\nMeanwhile, Cloudflare stock holds an IBD Composite Rating of 98, according to IBD Stock Checkup.\nIBD's Composite Rating combines five separate proprietary ratings into one easy-to-use gauge. The best growth stocks have a Composite Rating of 90 or better.\nFurther, Cloudflare stock has an Accumulation/Distribution Rating of A. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Its current rating indicates more funds are buying than selling.\nThe rating, on a scale of A+ to E, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.\nFollow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.\n\n\n\nYOU MAY ALSO LIKE:\nLearn The Best Trading Rules At Investor's Corner\nWant To Trade Options? Try Out These Strategies\nMonitor IBD's \"Breaking Out Today\" List For Companies Hitting New Buy Points\nIBD Digital: Unlock IBD's Premium Stock Lists, Tools And Analysis Today\nCatch The Next Big Winning Stock With MarketSurge","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2488419586"}