Cloudflare(US:NET)2025-05-08 22:02Financial Data and Key Metrics Changes - Cloudflare achieved revenue of $479.1 million, representing a 27% year-over-year increase [9][27] - The gross margin was 77.1%, above the long-term target of 75% to 77% [11][29] - Operating profit was $56 million, with an operating margin of 11.7%, an increase of 50 basis points year-over-year [32] - Free cash flow was $52.9 million, or 11% of revenue, compared to $35.6 million, or 9% of revenue, in the same period last year [35] Business Line Data and Key Metrics Changes - The number of customers paying more than $100,000 increased by 23% year-over-year, totaling 3,527 [9][28] - Revenue contribution from large customers grew to 69% of total revenue, up from 67% in the first quarter of the previous year [9][28] - Dollar-based net retention was 111%, consistent quarter-over-quarter [10][29] Market Data and Key Metrics Changes - U.S. revenue represented 49% of total revenue, increasing by 20% year-over-year [27] - EMEA accounted for 28% of revenue, with a 27% year-over-year increase [27] - APAC represented 15% of revenue, showing a significant 54% year-over-year growth [27] Company Strategy and Development Direction - The company is focused on disciplined execution and investing in go-to-market strategies, which have shown positive returns [14][48] - Cloudflare is positioning itself as a mission-critical partner for customers, emphasizing the importance of its innovative products and engineering capabilities [14][24] - The company is actively pursuing large contracts and has secured its largest contract in history, exceeding $100 million [13][15] Management's Comments on Operating Environment and Future Outlook - Management noted that the current global environment is more volatile than in previous quarters, but the company remains committed to its strategy [12][14] - The company is optimistic about long-term opportunities despite short-term volatility, focusing on customer needs and operational efficiency [14][38] - Management expects revenue for Q2 2025 to be in the range of $500 million to $505 million, representing a 25% year-over-year increase [37][38] Other Important Information - The company has seen a significant increase in DDoS attacks, with a 300% year-over-year rise, but its architecture allows it to absorb these attacks without additional costs [58][60] - Cloudflare's investments in AI and developer platforms have resulted in substantial growth, with AI inference requests up nearly 4000% year-over-year [22][23] Q&A Session Summary Question: Trends observed through early May regarding traffic and tariffs - Management indicated that there has been no significant change in internet traffic patterns despite tariff discussions, with traffic remaining steady [41][46] Question: Insights on margin performance and CapEx spending - Management reiterated a focus on the 40% rule for margins and indicated that there are still more margin opportunities than revenue opportunities [47][48] Question: Sales productivity and capacity tracking in the enterprise segment - Management expressed satisfaction with improvements in sales productivity and anticipated continued increases in sales capacity as new hires ramp up [52][54] Question: Impact of DDoS attacks on business - Management noted that the company’s architecture allows it to handle large-scale DDoS attacks effectively, without incurring additional costs [58][60] Question: Trends in the SaaS market and winning larger deals - Management highlighted that Cloudflare has caught up on critical features and offers superior performance compared to competitors, leading to increased success in securing larger deals [67][70] Question: Government sector traction - Management noted that governments are increasingly adopting zero trust approaches and choosing Cloudflare for its comprehensive solutions [73][74]