Cloudflare shares tumble
Cloudflare Inc. lost $4.2 billion of its market value after the cybersecurity-focused provider of cloud services joined Amazon.com Inc. in reporting a hit to demand for remote computing power, sparking the company’s worst day of trading on record.
The San Francisco-based company on Thursday lowered its full-year revenue outlook to $1.28 billion to $1.284 billion from an earlier estimate for $1.33 billion to $1.34 billion.
Chief Executive Officer Matthew Prince said on an earnings call that, after bank failures intensified “macroeconomic uncertainty,” it took the company longer to sell its products and it converted fewer sales leads into customers. Cloudflare shares closed 21% lower at $47.05 Friday.
Amazon said Thursday that growth in its Amazon Web Services cloud division cooled in April from the first quarter — and growth in the first three months of the year was the weakest since the company began breaking out the unit’s sales. AWS is the largest seller of rented computing power and software services.
Like Amazon, Cloudflare noted customers were being cautious on spending. Cloudflare reported first-quarter revenue of $290.2 million, just missing estimates for $290.9 million.
Prince said he wanted to be “very prudent” about future business and that while early signs were that conditions weren’t worsening, it also didn’t appear things would be getting “significantly better.”
Some Cloudflare analysts pointed to risks to the company from continued strains in the backdrop. Pressure on IT spending in general is likely to persist until economic growth improves, said John Butler, an analyst at Bloomberg Intelligence.
“We believe the current credit cycle will last longer than management expects and think salesforces take time to restructure, likely pressuring growth for the next year,” Oppenheimer analysts led by Timothy Horan said in a note.
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