Cloudflare Inc Q3 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Congrats on the results. Matthew, maybe I'll start with you. In the past, you've talked about the crystal ball nature of Cloudflare. And I guess I'm wondering, when you look into that crystal ball now, what is it telling you about the external business environment? And then perhaps could you give a bit more color on maybe even the quantity of the US-based [slip] deals?

Question: Matthew Hedberg - RBC Capital Markets - Analyst : Got it. Maybe just a quick one, a follow-up for Thomas. The pool of fund deals seems like it's pressuring NRR, maybe even CRPO in revenue. Is there a way or I guess, how would you have us think through the impact of that, especially as we think towards 2025? I know it's a short-term thing, and it certainly benefits the long-term model, but any guidepost that you can give us on the relative impact?

Question: Andrew Nowinski - Wells Fargo - Analyst : Congrats on the nice quarter. I want to start with a question on your AI. So you mentioned that a number of conversations with customers began to shift this quarter from AI training to AI inference, and I think you signed a large workers AI deal. Just give any more color on the AI landscape and some of the feedback you're hearing on Workers AI?

Question: Andrew Nowinski - Wells Fargo - Analyst : That was really helpful. And then I guess as my follow-up, I wanted to ask about just the team you've built. I think you've done a really nice job building out one of the best management teams in the industry and including the recent hire of CJ. So and you seem to find a new way to use your network with a new product every quarter, but I'm wondering if you can give us any color in terms of the direction that CJ wants to take Cloudflare's product development? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 10:00PM, NET.N - Q3 2024 Cloudflare Inc Earnings Call

Question: Mark Murphy - JPMorgan - Analyst : I'll add my congrats, and I agree with Andy that I think CJ is just an incredible hire. Matthew, it seems like you're capable of adding about 100,000 new developers per month, I believe, onto the platform. I think you crossed 2 million or 3 million developers. And now you have vectorized, you have hyperdrive. There's so many new products. The stats out there, there are 30 million to 100 million developers depending on how you define it. How many of those do you think are viable candidates for Cloudflare? And what do you think is attainable over time? And then I have a quick follow-up.

Question: Mark Murphy - JPMorgan - Analyst : I appreciate that. As a follow-up, there have been a couple of comments now that the AI models are advancing so fast as they're actually doubling every six months. which is hard to believe they're advancing so fast and now I think we're looking at the reasoning and the long-duration inference. We're starting to hear the inferencing is going to have to be multinodal and using InfiniBand. It's a pretty big step up. And so I'm just curious maybe how you see that developing? And how might that play into your architecture as these models just become so much more demanding?

Question: Brent Thill - Jefferies - Analyst : Matthew, just on the go-to-market changes. There have been questions just in terms of when you talk about the pushouts, we always see this and you've seen this in past quarters. Was this quarter more pronounced on the pushouts? Or is this just something you're commenting, hey, made some sales changes this is the natural side effect. I think was just curious about the magnitude of that push. Was that greater or equal to what you've seen historically in past quarters?

Question: Brent Thill - Jefferies - Analyst : Okay. And you called out Workers and you've been talking about this for a while but I guess how important is this now in the overall platform shift in adoption? How are you seeing this as customers are coming to you for multiple things. Are you seeing this as a big add-on big driver? How would you characterize where we're at in the adoption of Workers?

Question: Shaul Eyal - TD Cowen - Analyst : Thank you. Good afternoon, everybody. Congrats on a very solid performance. For Thomas or Matthew, there's no question, the number of 7-digit and probably 8-digit transactions are on the rise. We've seen some companies, some security-related companies, assisting larger customers with financing-related activities. What's the current thinking along these lines? Is it something that your customers are beginning to talk to you about what would be the approach here?

Question: Shaul Eyal - TD Cowen - Analyst : Actually, as they grow with you and want to consume more of your services at times, and as get addicted to some of your services, they would add -- they would probably ask for flexibility assistance in terms of payments or maybe asking you to utilize some of your balance sheet in their favor.

Question: Tim Horan - Oppenheimer - Analyst : There's a lot of moving parts, obviously, with the sales productivity and limited capacity there in the pooling. Can you maybe talk about the timing of when revenue growth can accelerate again. Do you think the fourth quarter around 25% guide, is that the bottom? Or do you think it's still a few more quarters out? And related to this, can you update us on what you think the timing of for the $5 billion revenue target that you have? And I had a quick product follow-up.

Question: Tim Horan - Oppenheimer - Analyst : And the $5 billion target may be what year? And then just on the product side, have you improved the process on going general availability with products? I know in the past, it took a little longer than expected. And I guess related to this, when do you think containers can hit GA?

Question: Joel Fishbein - Truist Securities - Analyst : Matthew, love to get an update from you on the public sector. Obviously, you've got (inaudible) certification. You've seen some very good customers there. I just love to hear what's happening there. And then also as it relates to that, where they are, do you think they are in their adoption of inference? That would be really helpful.

Question: Joel Fishbein - Truist Securities - Analyst : And do you feel like you have a sales capacity necessary there to hit that market?

Question: Jonathan Ho - William Blair - Analyst : Just wanted to get a little bit more color from some of the product side of things and particularly those around the data orientation. Can you maybe give us a sense of how R2 and D1 are faring within your customer base? And whether these products are helping drive some of the growth around AI and the inference modeling as well?