Cloudflare Earnings: Enterprise-Level Strength Lights Up the Period as Macro Conditions Improve

We are raising our fair value estimate for narrow-moat Cloudflare to $87 from $60 as a result of strong fourth-quarter results, the firm’s solid 2024 financial guidance, and an upward revision of our longer-term growth estimates due to Cloudflare’s increased penetration in the enterprise market. We believe that an improving macro will also benefit Cloudflare as customers increase their spending on cybersecurity after a slowdown in 2023. Lastly, we believe Cloudflare’s impressive enterprise penetration reflects positively on the personnel changes the firm made to its go-to-market organization earlier this year, a good omen for the future if its sales execution remains strong amid an improving demand landscape.