The cloud computing space has many players; but will there be only one winner?
The demand for cloud computing has been steadily increasing since the inception of the internet, with the global industry expected to grow from $371 billion in 2020 to $832 billion in 2025 — a Compound Annual Growth Rate (CAGR) of 17.5%. The pandemic has highlighted society’s need for the advanced internet solutions that this rapidly changing industry offers, putting the likes of Cloudflare (NYSE: NET) and Fastly (NYSE: FSLY) in the limelight.
Here are 3 competitors Cloudflare investors should be aware of.
Fastly (NYSE: FSLY) greatly benefitted from the pandemic-fueled surge in internet usage and content delivery network (CDN) demand, leading to its stock surging 386% in 2020 alone. However, lower-than-expected usage from TikTok owner, ByteDance — formerly Fastly’s largest client — caused Fastly’s price to fall in October.
Despite this crash, Fastly is still a great company. Its CDN network and edge computing services are highly advanced and help companies like Shopify and Slack provide better services to their customers. Fastly recorded Q3 2020 revenue of $70.6 million, a 41.9% year-over-year (YoY) increase, with customer count increasing 4.9% to 2,047 in Q3. The company’s operating loss has also been narrowing; from $8.9 million in Q3 2019 to $4.2 million in Q3 2020.
Though Cloudflare and Fastly have some overlapping common services, they have enough product differences to grow in their respective subspaces within the cloud computing industry.
2. Amazon Web Service (AWS)
Amazon Web Service (NASDAQ: AMZN) is a broad platform that provides web security, enterprise software, and more, and has seen tremendous growth since its inception in 2006. AWS is a hugely profitable Amazon segment, with an operating margin of 30.5% on revenues of $12.7 billion in Q4 2020, up from $9.95 billion the year previous. AWS revenue represented 10% of Amazon’s total sales in 2020.
Its Amazon Cloudfront segment specialty is a secure and programmable CDN that delivers data, videos, and applications to customers quickly, but with a focus on developer tools. Cloudflare differs by focusing on targeting smaller clients that do not need advanced developer tools. Though a very successful segment with huge growth potential, Amazon Cloudfront due to this difference.
3. Microsoft Azure
Azure is a public cloud computing platform specializing in Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS) that can be used for analytics, data storage, and much more.
Cloudflare trumps Microsoft (NASDAQ: MSFT) — and Amazon Cloudfront — in terms of customer ratings. Microsoft announced its ‘Intelligent Cloud’ segment, which includes Azure, SQL servers, System Center, and data centers, earned $14.6 billion in revenue in Q4 2020, a 23% YoY increase. This is just shy of the $14.83 billion in revenue in Q3 2020. Azure’s growth rate has slowed down to 50% in Q4 2020 from the 62% recorded in Q4 2019 and 76% in Q4 2018.
Though still Cloudflare’s third-biggest competitor, Azure’s slowing growth and less advanced product with less happy customers doesn’t make at all worried for Cloudflare’s future growth.
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