Cloudflare Stock Misses On Cash Flow In Q1

Cloudflare’s Q1 Earnings

At the time the low-cost R2 cloud storage service was launched, Cloudflare’s CEO has stated “we’re aiming to become the fourth major public cloud.” Big Tech has the advantage of strong margins and quite a bit of cash on the balance sheet to build out cloud infrastructure. For this ambition to materialize, not only must Cloudflare build more Points of Presence (PoPs) but the company must also undercut AWS on egress fees, for example, in order to remain competitive.

Conclusion:

Cloudflare is showing strong customer growth and its steady revenue growth also helps substantiate that cloud is, indeed, deflationary. What is likely weighing on the market’s mind is what the CapEx will be to become the fourth cloud provider. Management has confirmed that operating margin will not improve anytime soon as the company plans to re-invest and the company’s recent quarter showed a decline in free cash flow. The I/O Fund exited the stock based to focus on higher conviction companies that have a better cash flow margin.

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Beth Kindig

Beth Kindig

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CEO and Lead Tech Analyst for the I/O Fund with cumulative audited results of 141%, beating Ark and other leading active tech funds over four audit periods in 2