Technology
Cloud networking and cybersecurity company providing CDN, DDoS mitigation, and edge computing services.
View forensic reportSnowflake, Datadog, and Cloudflare sit at the centre of the broadening software rally identified on 17 April. Each has a distinct setup, but the common thread is a free cash flow inflection that consensus has only partially recognised.
Free cash flow has moved from negative to $324 million in three years. Workers AI has become the reference compute layer for inference at the edge. The April 17 rally hinted at what the data has been saying for twelve months.
Revenue grew 34% to $2.17 billion with 74% gross margins, and the edge network spanning 300+ cities creates a competitive advantage that hyperscalers cannot easily replicate.
CrowdStrike at $96 billion market cap versus Cloudflare at $59 billion — both are growing revenue at 25%+, both are unprofitable on a GAAP basis, and both claim to be the platform that wins cybersecurity. One is overvalued.
Oppenheimer calls the concerns 'overblown.' At 30x forward revenue with 35% growth and 78% gross margins, the edge network moat is being underpriced.
At 182x forward earnings and 34x revenue with negative operating margins, Cloudflare's $74B market cap requires a decade of flawless execution that even great companies rarely deliver.