Happy Monday everyone, in today's briefing we'll take a look at Cloudflare earnings from last week, but we'll skip over Lumen's, which were described by some analysts as "messy" with "uninspiring" guidance for 2022. Reporting this week is Akamai, Fastly, Equinix, and Digital Realty.
A new decentralized mobile network launched, built with blockchain and CBRS, and I have an update on EdgeConnex's aspirations to build a EV charging network coupled with edge data centers.
Let's get into this week's update.
Your Weekly Briefing
Cloudy With a Chance of Workers - Cloudflare reported earnings and notched its sixth consecutive quarter of 50%+ revenue growth, which was 54% for 4Q21. Revenue was $194M, and metrics improved across the board, with gross margin increasing 110bps y/y to 79.2%, Dollar-Based Net Retention coming in at 125%, up 100bps q/q and up 600bps y/y, FCF improved 137% y/y, marking the company's first quarter of positive FCF.
By geography, US revenue grew 11% q/q, and 52% y/y just crossing the $100M mark, EMEA revenue grew to $52M, up 14% q/q, and 60% y/y, and APAC revenue came in at $26M, up 7% q/q and up 29% y/y, while Other/ROW grew 27% q/q and 113% y/y.
Customer growth improved with the addition of 7,700 paying customers in the quarter, increasing the total paying customer count just over 140K, up 26% y/y, along with the addition of 156 large customers, bringing the total large customer base to 1,416, up 71% y/y. Large customers represented 54% of total revenue for FY21. Customers with >$500K in annual revenue improved 70% y/y to 121 and customers with >$1M increasing to 56, up 75% y/y.
Operating expenses increased 19% q/q, led by R&D spend and was followed by Sales & Marketing, and G&,A, while Network Capex was 10% of revenue in the quarter (~$19M).
- +21 Tbps of capacity added in the quarter, bringing total network capacity to 121 Tbps, driven by an 88% increase in traffic volumes y/y
- Network Capex is expected to increase to 12-14% of revenue in 2022, whereas over the last 5yrs, it's been consistent at around ~11%
- R2 Object Storage reached over 9K sign-ups for the closed beta, representing 100s of petabytes of storage. The company plans to move R2 to open beta in Q2, followed by general availability in the second half of the year.
- Over 200K domains have been signed up for new email routing product
- >20% of new enterprise deals include Workers, its edge computing product
- Cloudflare is planning at least 7 innovation weeks with new products and capabilities in 2022
- Announced the acquisition of Vectrix to add cloud-access security broker (CASB) capabilities to the zero trust product.
- Channel remains a big opportunity, accounting for only 11% of revenue, while direct sales accounts for 89%
Update: EdgeConnex and EV Charging
Back in December, I wrote about EdgeConnex entering the EV charging business.
EdgeConnex is moving beyond data centers with the development of a full product suite for logistics, autonomous vehicles, and ride share companies that will include a nationwide EV charger network, maintenance garages, driver amenities, and edge colocation for data ingest and other purposes. While I haven't seen any PR for the new initiative, it's possible I missed it, but more details can be found on the EdgeConnex website . Additionally, EdgeConnex hired an industry veteran from Greenslots (Shell Recharge Solutions) to head up the EV initiative.
Today, the company has two internships (Finance Intern - Electric Vehicle Team, Strategy Intern - Electric Vehicle Team) posted on its website for its new venture, noting this EV business is a new subsidiary focused on acquiring, developing, and operating electric vehicle (EV) fleet charging stations.
EdgeConnex has yet to issue a PR or say anything about the new venture, but the postings reveal a few details about its ambitions.
EdgeConneX has launched a subsidiary company focused on acquiring, developing, and operating electric vehicle (EV) fleet charging stations. The US grid infrastructure is not currently prepared for the rapid adoption of EVs, and ECX has identified an opportunity in supporting private EV charging for commercial EV fleets. ECX is aggressively pursuing properties across the United States to create vehicle charging capacity: tackling the challenges of hardware (charger) shortages, optimizing government & utility incentives, and continuing to improve and develop our strategic roadmap to inform which markets to play in. ECX has been engaged with real estate portfolios, autonomous vehicle companies, vehicle original equipment manufacturers (OEM), utility companies, and logistics companies on a regular basis. Our Strategy Intern will be exposed to all facets of the business: real estate underwriting for acquisition and development, infrastructure and power contracting, supplier partnerships, sales, financial reporting, and strategy development.
EdgeConnex initially launched with a focus on developing small edge data centers in secondary and emerging markets, later expanding into larger established markets, and eventually building even bigger for hyperscalers. While the EV venture may seem odd, the company may be onto something interesting.
In the past, whenever someone mentioned 5G and autonomous vehicles, as if they were peanut butter and jelly (they're not), I've referenced Cruise, who has wrote a bit about how they get data out of cars and into the cloud for analysis, and that doing this in real time is simply impossible.
In order to connect our on-premises garages, offices, and data centers with remote cloud providers, we needed a way to extend our private wide area network (WAN) backbone .
For example, one workflow that requires hybrid connectivity is the process of analyzing recordings from car cameras, lidars, radars, and other sensors. Many people assume that this kind of data is streamed from the car to the cloud, but in reality, so much data is generated from these instruments that trying to stream it all over LTE or even 5G in real-time is simply impossible — there’s just not enough bandwidth. Instead, sensor data is buffered on local disks in the car. When the car returns to a hub location, the recorded data is extracted and uploaded to the cloud over private fiber lines.
Taking this into consideration, while noting it is still early for AV, dedicated and purpose built parking lots with facilities to colocate network, compute, and storage equipment while providing connectivity to the public cloud(s) to support companies like Cruise, may not be so odd after all.
Since moving to San Francisco, I probably see more AV's on the road than I see people walking to/from offices and Cruise just opened up its driverless cars to the public. I can't wait to hitch a ride, and once I do, I'll let you know how it was. The future is already here—It's just not very evenly distributed
Last Week in Digital Infrastructure
Pollen Mobile, a new decentralized mobile network project launched and has more than a dozen radio sites across the San Francisco Bay Area, which aims to provide a data-only, privacy focused mobile network that leverages CBRS. Users operating radio sites earn incentives for doing so through PollenCoin, a new cryptocurrency on the Solana blockchain.
Kentik launched Market Intelligence, a new product that analyzes the global routing table and autonomous system (network) relationships to provide customers with insights into global networks for competitor tracking, customer targeting, and helps identify market expansion opportunities. The product is similar to a product once available in the past from Renesys, who was acquired by Dyn the DNS service provider that was acquired and later ruined by Oracle in 2016.
The US FCC received 181 applications to participate in the Secure Networks Act Reimbursement Program which will provide funds to replace Chinese manufactured communications equipment from the likes of Huawei and ZTE. Of the 181 applications received, the FCC has found 162 are eligible and acceptable, and are estimated to remove, replace, and dispose of ~24,000 pieces of equipment across ~8,400 locations across the US.
NextDC announced the availability of the new AWS cloud on-ramp in Sydney at its S2 data center, supporting 100G AWS Direct Connect connectivity, including encryption capabilities (MACsec).
Recent Subsea Developments
Telecom Egypt and Grid Telecom, a subsidiary of Greece’s power transmission operator (ADMIE), signed an MoU to explore connecting Egypt and Greece via possible submarine cable system.
Korea Telecom (KT)signed an MoU with real estate services company, Savillis to explore a new 9,000km submarine cable project that will seek to connect Korea, Japan, Taiwan, Indonesia, Singapore and the Philippines, but no further details have been provided yet. KT will be responsible for design, construction, and operation of the system, while Savillis will be responsible for project management, including asset management, and sourcing investment for the project.
Inligo Networks and Indosat Ooredoo Hutchinson are planning an 18,000km submarine cable system connecting multiple locations in Indonesia to Australia, Guam, Singapore, and the US. The system, Asia Connect Cable System (ACC-1) will deliver up to 240 Tbps of capacity, and begin construction this year with the first route connecting Singapore, Batam, and Jakarta, followed by Medan, Makassar, Kupang, Dili (Timor Leste) to Darwin (Australia), and finally connecting Guam to Los Angeles, with a completion data targeting 2024.
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