Cloudflare, Inc. Q4 FY2024 earnings call

• Strong end to 2024 with significant revenue growth and record large customer additions.
• Customers showed discipline but signs of confidence returning, especially in the US, with themes like security, AI, modernization, and efficiency driving Cloudflare's strength.
• Improved go-to-market execution under Mark Anderson, with sales productivity increasing and more account executives ramping up. Crossed 3 million active developers on platforms.
• Notable customer wins included a Fortune 100 tech company, an AI company, a global retailer, a US investment firm, a global aviation group, a global financial institution, a rapidly growing tech company, and an international financial institution.
• Discussion of AI opportunities with Cloudflare Workers being key for AI agents, inference, and efficiency gains, with the team seeing significant optimizations in AI inference on their platform.

Cloudflare, Inc. achieved revenue of $459.9 million in Q4 2024, up 27% year over year. The number of large customers (paying >$100,000 per year) was 3,497, up 27% year over year, contributing 69% of revenue (up from 66% in Q4 last year). Dollar-based net retention ticked up to 111% quarter over quarter. Gross margin was 77.6%. The company added a record 55 customers spending over $1 million per year, ending the year with 173 such customers.

• For Q1 2025, revenue is expected in the range of $468 million to $469 million (24% year over year growth), operating income in the range of $54 million to $55 million, and diluted net income per share of $0.16.
• For full year 2025, revenue is expected in the range of $2.09 billion to $2.094 billion (25% year over year growth), operating income in the range of $272 million to $276 million, and diluted net income per share in the range of $0.79 to $0.80.

• Forward-looking statements are subject to risks and uncertainties beyond control, including macroeconomic conditions, competition, and execution of go-to-market strategies. Actual results may differ significantly from projected forward-looking statements.

Q: Hamza Fodderwala asked about DeepSeq and AI inference moving to the edge.

A: Matthew Prince discussed DeepSeq's impact on AI efficiency and Cloudflare's role in inference with Workers, stating Cloudflare Workers is key for AI agents and inference with efficiency gains.

Q: Matt Hedberg asked about product innovation and inflection points.

A: Matthew Prince talked about go-to-market excellence and AI use cases on Workers, highlighting the team's focus on being world-class in go-to-market and exciting AI applications built on Workers.

Q: Adam Borg asked about FedRAMP high and government business.

A: Matthew Prince discussed compliance with FedRAMP high while maintaining network integrity, emphasizing Cloudflare's approach to meet federal requirements without fragmenting the network.

Q: Jonathan Ho asked about security performance.

A: Matthew Prince mentioned broad platform adoption and developer growth, noting customers are increasingly buying the broad suite of Cloudflare's products rather than specific features.

Q: Fatima Boolani asked about go-to-market compensation and incentives.

A: Matthew Prince and Thomas Seifert discussed adjustments in territories and quotas, with Mark Anderson's team having set up new territories and quotas to drive productivity.

Q: Gabriela Borges asked about go-to-market and AI native companies.

A: Matthew Prince talked about bottoms-up adoption of Cloudflare's platform and targeted speedboats to specific customers to build case studies for broader adoption.

Q: Trevor Walsh asked about Workers and agents.

A: Matthew Prince explained Cloudflare Workers' advantages over hyperscalers in agent development, highlighting pay-for-use model and higher utilization of GPUs on Cloudflare's platform.

Q: Andrew Nowinski asked about SaaS wins.

A: Matthew Prince discussed displacing first-gen zero trust vendors and Cloudflare's broad platform solutions, noting the company wins by offering a comprehensive and high-ROI solution compared to competitors.