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I also am shocked by their capex/sales, ~20%. This is insanely high capex relative to other companies we follow - most spend less than 10% of sales on capex, and many spend 5% or less. Why is Cloudflare spending so much on property, plant, and equipment??

They are building data centers (or renting space) to be able to deliver content faster. In this call and previous calls they've mentioned that hardware costs are falling while speeds are getting better.

I don‘t like how NET advertised this zero-second cold-start when it doesn’t apply to most sites (I’m not even clear if this is CDN or edge computing related), for example, so I want to know some more about the tech that will compete for edge processing.

The zero second start time is for Cloudflare Workers which is their server-less product. This is the one that competes with AWS Lambda, and it costs 75% less and is basically a superior product, which is why I think they are so excited about it. What I'm less clear about is if server-less and edge computer are used interchangeably. I thought edge computing was programmable logic within the CDN, and server-less was separate, but sometimes they are used as synonyms.

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After getting more familiar with Cloudflare and Fastly I believe they serve somewhat different markets. Cloudflare has 3 million total customers, 90,000 of which are paid customers, 637 with 100k+ ARR. Fastly has 1951 total customers and 303 with 100k+ ARR and they mention that the average spend of these 303 customers is $716,000. Unfortunately Cloudflare does not break out the average spend statistic, so it is hard to compare on the number alone.

The biggest standout to me is that Cloudflare added 80 100k+ ARR customers, while Fastly netted 6 100k+ ARR customers. What I'm trying to reconcile is how Fastly has DBNRR go up to 130%+, and Cloudflare had DBNRR go down two points to 115%. I'm guessing it is just existing customers doubling down on Fastly, and Cloudflare small customers have a ton of churn. Looks like Fastly revenue growth mostly comes on expanding usage while Cloudflare's comes on expanded customer count.

From what I have heard the free tier of Cloudflare provides a lot of value and out of the box. Fastly seems more geared to enterprises that need speed and is too expensive to just test out without massive scale. Cloudflare has a wide range of products, and Fastly has a more targeted suite of products. Fastly has ~600 employees and Cloudflare ~1500.

When Cloudflare is down, it seems like the half the internet is down. That seems consistent with having 3 million customers and contributes to have an endlessly deep pipeline to convert free members to paid, and convert existing paid to 100k+ ARR. Keep in mind supported 2.9 million free customers is a big cost, but the company is still able to perform well despite giving away so much.

I am also wondering longer term about the companies that have a usage model versus fixed costs. While it is boosting share prices massively for companies like Twilio and Fastly, it leaves the door open for others to compete on pricing.
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