Cloudflare Drives Analyst Optimism With 'Speedboat' AI Initiatives, Sales Productivity Gains

Core Viewpoint - Goldman Sachs analyst Gabriela Borges maintains a Buy rating on Cloudflare Inc, lowering the price target to $161 from$183, following an investor day presentation [1] Sales Productivity and Growth - Cloudflare reported a significant increase in Account Executive sales productivity, with TTM ACV per rep returning to 2022 levels after previous declines [2] - The company has a clear path to accelerate AE capacity through 2025 [2] Strategic Initiatives - Cloudflare introduced "speedboat" initiatives to leverage the AI inflection point in the developer ecosystem, focusing on aligning internal teams to enhance product development [3] - The company is actively collaborating with target accounts for product development [3] Pricing Models and Adoption - Cloudflare detailed its pool of funds initiative, which aims to drive platform adoption, with PoF deals constituting approximately 8.5% of ACV in Q4 2024, up from 2.5% in Q4 2023 [4] - These deals are expected to lower pricing in the early adoption stages but lead to higher long-term ACV [4] Innovation and Efficiency - The company's architecture supports strong internal product innovation and higher compute utilization, positioning Cloudflare favorably for AI-native applications [5] - Cloudflare's inferencing computing allows for efficient workload scheduling, achieving up to 7 times higher utilization compared to hyperscalers [6] Financial Outlook - Management expects capex as a percentage of revenue to remain consistent, with projected Act III revenue growth accelerating, reflecting a new disclosure of 76% ACV growth in 2024 [7] - Cloudflare aims to achieve a $5 billion ARR target by 2028, previously set for 2027, indicating a ~28$2.09 billion and EPS of 81 cents, with the price target reflecting 22 times Q5-Q8 revenue [10] - The current price action shows NET stock up 2.56% at $116.55 [10]