Cloudflare: A Multi-Act Cybersecurity & Edge Computing Company

Cloudflare is far from a one-trick pony.

Let’s talk about one of the most important internet companies in the world and why it could be a great investment for the long term.

The company I’m talking about is Cloudflare.

Cloudflare calls itself a “security, performance and reliability” company focused on “building a better internet.”

The company has a global network of data centers on top of which it has built dozens of products and services. A data center is a facility that contains many powerful computers that work together.

Cloudflare is probably best known for offering distributed denial-of-service (DDoS) protection, which secures websites and apps from attacks that try to take them offline by flooding them with traffic.

More than 20% of websites on the internet use Cloudflare’s DDoS protection, as well as its other products that secure, speed up and increase the reliability of those sites.

In its second quarter earnings conference call, Matthew Prince, CEO of Cloudflare, said that this is only the company’s first act. It’s still a big growth opportunity, but he said that it’s just one of three major growth opportunities for his company.

“Our first acts were how do we protect the infrastructure of customers around the world” -Matthew Prince

Cloudflare’s second act is what it calls its Zero Trust products. Zero Trust is a cybersecurity framework and these products enable a company’s employees to connect to internal and external networks and applications in a secure manner. 

With the number of attacks increasing every day, Zero Trust has never been more important and Cloudflare wants to be a big player in this space.    

“We're able to go to all of those people who adopted our application security products and now say that we can help you with Zero Trust as well. That that is the big act that we're focusing on right now.”
–Matthew Prince

Finally, the third act for Cloudflare and maybe the most exciting one yet is its Workers edge computing platform. With Workers, developers can build “serverless” applications. These are applications which run extremely quickly because they are deployed in data centers that are physically close to end users.

“We will always have a performance advantage over legacy, centralized computing solutions — even those that run in the "cloud." If you have to pick an "availability zone" for where to run your application, you're always going to be at a performance disadvantage to an application built on a platform like Workers that runs everywhere Cloudflare’s network extends.” –Matthew Prince

But Cloudflare says that speed isn’t even the biggest benefit of edge computing. Instead, cost, ease of use, and especially regulatory compliance will ultimately be far more important.

The Workers platform is key to Cloudflare ambitions to become the fourth cloud after AWS, Azure and GCP.

“Act three will really start to hit in a material way around revenue in three to five years. We have been very pleasantly surprised how that adoption has happened faster and sooner and earlier than we expected. R2, which is our object store and our Amazon S3 competitor went into public beta last quarter, and we expect that it will go into GA [general availability] right at the end of Q3.” –Matthew Prince

This is a company that is positioned perfectly to capitalize on the growth in cybersecurity and edge computing. That’s why I’m bullish on Cloudflare even though it is one of the most expensive stocks in software.