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Fastly (FSLY) Q3 Recap

November 22, 2020 / poffringa

Fastly had a dramatic quarter. After breaking $130 a share, in mid-October they pre-announced an expected miss for their Q3 revenue guidance, primarily attributable to revenue underperformance from their largest customer. This triggered a downward spiral for the stock to the $80’s prior to the actual earnings announcement on October 28th. The Q3 report largely met reduced expectations, but called into question the near term growth story as Q4 estimates appeared soft. The stock subsequently dropped into the $60 range, but has recovered since into the low $80’s as investors seem to maintain confidence in the long term story. Even with this volatility, the stock is up 286% in 2020.

Additionally, over the past several months, Fastly announced and completed the acquisition of Signal Sciences. Management highlighted the large opportunity for cross-sell to existing customers, adding rapid revenue growth and higher gross margin to the core business. They announced plans to combine product solutions for application and API security into a new offering called Secure@Edge. In mid-November, Fastly held their annual user conference, Altitude, which included a slew of product updates, customer talks and insights into next year’s roadmap.

In this blog post, I review the latest earnings report, the Signal Sciences acquisition and announcements from Altitude. I also revisit the competitive landscape and broader dynamics in the evolving edge compute, software-defined network and security markets. This information should help investors evaluate their own consideration for an investment in FSLY stock. At the end, I discuss application to my personal portfolio and investment plan going forward.

Twilio (TWLO) Q3 Recap

November 8, 2020 / poffringa

Twilio announced Q3 earnings on October 26th. The results were strong, beating estimates for both revenue and earnings by a large margin. Similarly, the company raised Q4 revenue estimates by about 6% of annualized growth at the midpoint. In spite of this, TWLO stock dropped 5% the following day. As investors will recall, Twilio conducted their Investor Day on October 1st. During that event, leadership announced that they would exceed their Q3 revenue estimates, as well as provided several other bullish long term performance expectations. Those updates drove the stock up about 13%. Twilio also conducted their annual user conference, Signal, in late September, which included several new product releases and large customer use cases. Finally, Twilio acquired leading Customer Data Platform (CDP) provider Segment in October.

Obviously, the past several months were packed with exciting updates to the Twilio story. In this blog post, I review Twilio’s Q3 earnings, Investor Day and the Segment acquisition. I also dig into product enhancements announced at Signal and revisit the competitive landscape. For a refresher of my prior coverage of Twilio, interested investors can read past quarterly updates and my original investment thesis.

Elastic (ESTC) Q1 Recap

October 19, 2020 / poffringa

Elastic announced Q1 FY2021 (May – July) earnings on August 26th. The results were favorable, with significant beats on both revenue and EPS. They also delivered a large increase in FCF margin to 17% as well as a 24% improvement in operating margin. Next quarter and full year guidance were raised slightly, reflecting ongoing concerns around COVID-19 headwinds. The market reaction was muted, with a slight decline in share price the next day. On the earnings call, the leadership team provided other updates on customer wins and their broader go-to-market strategy. During the four months before earnings, Elastic delivered three major point releases with meaningful product improvements across all solution categories. Highlights included the new Workplace Search product and a Unified Agent with malware protection.

Additionally, Elastic held an Analyst Meeting on October 14th, which included further updates to their broader strategy. While no new financial targets were revealed, leadership provided interesting insights into large customer growth and expansion across multiple solution categories. This customer motion highlights the potential for Elastic’s long term growth, as some enterprise customers value the breadth of Elastic’s solutions and their unified pricing model. In this post, I review Elastic’s Q1 earnings and other business updates that occurred during the quarter. I also examine product enhancements and Elastic’s general competitive positioning. For additional background on the Elastic investment thesis, interested readers can review my past quarterly updates and original deep-dive.

DocuSign (DOCU) Q2 Recap

October 4, 2020 / poffringa

DocuSign announced Q2 FY2021 earnings on September 3rd. The results were strong, with large beats on both revenue and EPS. Additionally, they raised Q3 and full year revenue estimates by a wide margin. In spite of this, DOCU stock dropped about 11% the next day, as the market was likely hoping for an even larger beat following a spectacular earnings report from ZM. On the earnings call, the leadership team spoke to the significant opportunity for DocuSign beyond eSignature, highlighting international business growth, future customer expansion into the full suite of contract lifecycle management products and the upcoming roll-out of notary services. In this blog post, I review DocuSign’s Q2 earnings, customer wins and other business updates that occurred during the quarter. I also analyze product enhancements, acquisition updates and the competitive landscape. For additional information on the DocuSign investment thesis, interested investors can read my past quarterly updates and original deep-dive.

Alteryx (AYX) – Q2 Recap

September 21, 2020 / poffringa

Alteryx announced Q2 earnings on August 6th. They delivered a slight beat to revenue estimates and a large beat on EPS. However, Q3 and full year revenue estimates came in below analyst targets. Currently, the full year revenue growth target sits at 11%, down from 65% in 2019. On the day following the Q2 report, the stock dropped by 28%. On the earnings call, the leadership team discussed a few challenges during the quarter, primarily attributable to the macro environment and the associated slowdown in enterprise spend. Over the course of the quarter, Alteryx launched several new product offerings. In this post, I review Alteryx’s Q2 earnings, customer adds and the expansion of the platform. I also take a look at the bigger picture in analytics and how Alteryx is positioned in the emerging competitive landscape. For more background on Alteryx, readers can review my prior coverage.

Datadog (DDOG) Q2 Recap

September 13, 2020 / poffringa

Datadog announced Q2 earnings on August 6th. The results topped expectations for both revenue and earnings. Additionally, they raised Q3 and full year revenue estimates, but not by as wide a margin as in past quarterly reports. The stock dropped by almost 20% the next day, after a nice run-up in advance. During the earnings call, the leadership team discussed a few adverse effects as large customers optimized their usage in reaction to the macro environment. On the flip side, customer adds and DBNER continued at a high rate, providing confidence that Datadog can sustain growth after the COVID-19 headwinds clear. In this post, I review Datadog’s Q2 earnings and dig into the many product updates that occurred over the last several months. I also revisit the competitive landscape and examine how Datadog’s extension into new categories further expands their addressable market. For more background on Datadog, readers can review my prior quarterly recaps and initial analysis.

Fastly And Signal Sciences

September 2, 2020 / poffringa

On August 27, Fastly announced their intent to acquire Signal Sciences. An outcome of the acquisition will be to combine the security capabilities of both companies into a new product offering called Secure@Edge. This significantly bolsters Fastly’s existing security product line, providing an accretive blending of existing offerings with new ones provided by Signal Sciences into a comprehensive solution designed to protect modern web applications and APIs at scale. I don’t normally dedicate a blog post to every acquisition, but I think this one will deliver an oversized contribution to the trajectory for Fastly and provides more justification for bullishness going into 2021. In this post, I will dig into Signal Sciences, synergies with Fastly and how the combined company is positioned for rapid growth. Interested investors can review my prior coverage of Fastly for more detail on the investment thesis.

Twilio (TWLO) Q2 Recap

August 23, 2020 / poffringa

Twilio announced Q2 earnings on August 4th. The results were strong, beating estimates for both revenue and earnings by a large margin. Similarly, they raised Q3 revenue estimates by almost 10% of annualized growth at the top end. In spite of this, TWLO stock dropped a modest 2% the following day, as the stock had run up prior to earnings and market participants were likely expecting a bigger beat. On the earnings call, Twilio management highlighted several customers wins and momentum in telehealth. Subsequent to earnings, Twilio conducted a capital raise for another $1.25B, fueling speculation of an acquisition. In this blog post, I review Twilio’s Q2 earnings and other business updates that occurred during the quarter. I also dig into product enhancements and revisit the competitive landscape. For a refresher of my prior coverage of Twilio, interested investors can read past quarterly updates and my original investment thesis.

Fastly (FSLY) Q2 Recap

August 14, 2020 / poffringa

Fastly (FSLY) reported Q2 earnings on August 5, 2020. On the surface, the performance was impressive, beating estimates on both the top and bottom line and raising Q3 and full year guidance. While Q2 revenue accelerated 24% sequentially over Q1, the market was looking for greater outperformance. This was evidenced by the stock’s nearly 18% drop the following day. After the 5x run-up in FSLY stock since the beginning of 2020, there was likely some profit taking as well. As part of the earnings release, Fastly management provided updates on the Compute@Edge beta and discussed a number of customer wins. In this post, I review Fastly’s Q2 earnings and other business updates that occurred during the quarter. I also dig into their evolving product offerings and revisit the competitive landscape. For a refresher on my prior coverage of Fastly, please see my original analysis, Compute@Edge deep dive and past quarterly updates.

Cloudflare Serverless Week Unpacked

July 31, 2020 / poffringa

Cloudflare (NET) kicked off Serverless Week with a blog post from their CEO on Sunday, July 26. The event ran this past week and highlighted a number of enhancements to Cloudflare’s serverless edge compute product. These included reduced cold start times, additional language support, improved developer tooling and lower price points. They also unveiled a new offering called Workers Unbound, which removes prior restrictions on CPU usage to allow for long running processes. These are all very exciting for serverless edge compute adoption and represent a step up in capabilities for Cloudflare. In this post, I will dig into the changes announced and what these imply for usage of Cloudflare’s Workers product. I will also try to draw parallels to Fastly’s Compute@Edge offering, based on what we can glean thus far (still in beta). At a high level, this progress from Cloudflare provides further momentum for the migration of application processing out of central data centers (whether cloud or private) to the network edge. This trend should benefit both FSLY and NET, as leading independent providers of serverless edge compute solutions.

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