Revenue Unicorn Club: Cloudflare

Congratulations to Cloudflare as it crosses $1 Billion in annual revenue and joins the software Revenue Unicorns!
Let's see what we can learn from Cloudflare's journey...
Revenue Growth

Cloudflare consistently and durably grew revenue across all stages on its path to $1 Billion in revenue. Notably, Cloudflare’s revenue growth was greater than the Revenue Unicorn median after $500 Million in revenue and experienced some periods of acceleration.
Gross Margin

Cloudflare has a durable gross margin structure, exceeding the Revenue Unicorn median across all revenue ranges. Datadog, DocuSign, and Splunk displayed similar gross margin strength across all revenue ranges.
Sales & Marketing

Cloudflare invested more than the Revenue Unicorn median in sales and marketing during its path to $1 Billion in annual revenue. HubSpot and Okta also invested more than the Revicorn median for sales and marketing expense as a percentage of revenue across all revenue ranges.
Research & Development

Cloudflare invested heavily in research and development early in the Company’s lifecycle. Cloudflare’s spend on research and development trended in a similar fashion to CrowdStrike’s approach on the path to $1 Billion in annual revenue.
General & Administrative

Cloudflare’s general and administrative expense was above than the median Revenue Unicorn as they scaled to $1 Billion in annual revenue.
Stock Based Compensation

Cloudflare had a higher SBC expense as a percentage of revenue as compared to the Revenue Unicorn median up to $500 Million in revenue. After $500 Million in revenue their SBC expense as a percentage of revenue was roughly equal to or below the Revenue Unicorn median. When viewing SBC expense as a percentage of enterprise value, Cloudflare is at 1.2%, which is lower than the Revenue Unicorn median of 1.4% in the $1 Billion+ revenue range.
Free Cash Flow

Cloudflare’s free cash flow margin improved with scale, exemplifying their operating leverage. Datadog, CrowdStrike, and Workday delivered a similar trend of improving free cash flow margin with business growth.
Time to Reach $1 Billion in Revenue
Cloudflare reached $1 Billion in revenue after 13.25 years. This is longer than the median time of 11.25 years it took other Revenue Unicorns to reach the $1 Billion mark. Other Revenue Unicorns that took a similar amount of time to achieve the $1 Billion revenue threshold include Splunk (13.50 years) and Wix (14.25 years).
Other Revenue Unicorns founded around the same time as Cloudflare (2009 founding) include Twilio (2008), Okta (2009), Nutanix (2009), and Datadog (2010). This set of companies took a median of 10.88 years to achieve $1 Billion in revenue (Twilio at 10.75 years, Okta at 11.50 years, Nutanix at 8.00 years, and Datadog at 11.00 years).
The Journey to $1 Billion in Revenue
For those of you that love data as much as we do, below is the full data set used for this analysis.
Again, congratulations to the Cloudflare team! Stay tuned for the next Revenue Unicorn update.


Note: The complete list of Revenue Unicorns used in the comparison can be found in the presentation here.
About Cloudflare
As per the Company’s materials, Cloudflare is a global cloud services provider that delivers a broad range of services to businesses of all sizes and in all geographies—making them more secure, enhancing the performance of their business-critical applications, and eliminating the cost and complexity of managing individual network hardware. The Company was founded in 2009 by Matthew Prince, Lee Holloway, and Michelle Zatlyn. Cloudflare’s network serves as a scalable, easy-to-use, unified control plane to deliver security, performance, and reliability across on-premises, hybrid, cloud, and software-as-a-service (SaaS) applications. Cloudflare’s network is designed to be able to grow capacity quickly and inexpensively; to allow for every server, in every city, to run nearly every Cloudflare service; and to allow the Company to shift customers and traffic across our network efficiently.
The Company reported $290 Million in first quarter revenue for the period ended March 31, 2023. Combined with results from the preceding quarters, this recent performance boosts Cloudflare across the $1 Billion in annual revenue threshold as measured on a last twelve month basis to become the latest software Revenue Unicorn.
About the Revenue Unicorn Playbook
The Revenue Unicorn Playbook is an analytical guide that explores the growth of public software companies from $100 Million to $1 Billion in revenue. The goal of the Playbook is to offer founders and company leaders a framework to examine their growth and investments as they scale.
You can find the original Revenue Unicorn article here and presentation here.
The information provided herein is the opinion of Friends & Family Capital and does not reflect the view of any other person or entity. It is for informational purposes and should not be construed as an investment recommendation. Data sources include CapIQ and Wall Street research. Copyright © 2023, S&P Global Market Intelligence (and its affiliates, as applicable). Friends & Family Capital is an investment adviser registered with the U.S. Securities and Exchange Commission.