cloudedjudgement.substack.com · 2022-02-04 · 1581d

Clouded Judgement

This article analyzes cloud software company earnings and valuation multiples in February 2022, highlighting that hyperscale cloud businesses (AWS, Azure, GCP) are achieving 40%+ YoY growth at massive scale, challenging linear deceleration assumptions. The author argues cloud software fundamentals remain strong despite significant stock price declines driven by Fed policy tightening and rate hike expectations rather than deteriorating business quality.

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Metrics in this report

AWS Revenue Run Rate

71billion USD

AWS at Q4 2021, growing 40% YoY

AWS Run Rate

71billion USD

AWS division of Amazon, February 2022

AWS YoY Growth

40percent

AWS division of Amazon, February 2022

Azure Revenue Run Rate

42.5billion USD

Azure at Q4 2021 (midpoint of $40-45B), growing 46% YoY

Azure Run Rate

40-45billion USD

Azure division of Microsoft, February 2022

Azure YoY Growth

46percent

Azure division of Microsoft, February 2022

Customer Acquisition Cost Payback

24months

median

Public SaaS companies (gross margin adjusted)

EV / NTM Revenue Multiple

10.0multiple

median

Overall public SaaS companies

EV / NTM Revenue Multiple

33.5multiple

median

Top 5 SaaS companies by valuation

EV / NTM Revenue Multiple

18.1multiple

median

High-growth SaaS (>30% NTM growth)

EV / NTM Revenue Multiple

8.6multiple

median

Mid-growth SaaS (15%-30% NTM growth)

EV / NTM Revenue Multiple

4.4multiple

median

Low-growth SaaS (<15% NTM growth)

Free Cash Flow Margin

3percent

median

Public SaaS companies

G&A Spend

19percent of revenue

median

Public SaaS companies

Google Cloud Revenue Run Rate

22billion USD

Google Cloud (including GSuite) at Q4 2021, growing 44% YoY

Google Cloud Run Rate

22billion USD

Google Cloud division, February 2022

Google Cloud YoY Growth

44percent

Google Cloud division, February 2022

Gross Margin

74percent

median

Public SaaS companies

High-Growth SaaS Valuation Multiple

18.1x

median

Companies with >30% projected NTM growth

LTM Growth Rate

34percent

median

Public SaaS companies

Low-Growth SaaS Valuation Multiple

4.4x

median

Companies with <15% projected NTM growth

Mid-Growth SaaS Valuation Multiple

8.6x

median

Companies with 15-30% projected NTM growth

NTM Growth Rate

24percent

median

Public SaaS companies

Net Revenue Retention

119percent

median

Public SaaS companies

Operating Margin

-19percent

median

Public SaaS companies

R&D Spend

26percent of revenue

median

Public SaaS companies

SaaS CAC Payback Period

24months

median

Public SaaS companies

SaaS FCF Margin

3percent

median

Public SaaS companies

SaaS G&A Spend as % of Revenue

19percent

median

Public SaaS companies

SaaS Gross Margin

74percent

median

Public SaaS companies

SaaS NTM Revenue Growth

24percent

median

Public SaaS companies

SaaS Net Revenue Retention

119percent

median

Public SaaS companies

SaaS Operating Margin

-19percent

median

Public SaaS companies

SaaS R&D Spend as % of Revenue

26percent

median

Public SaaS companies

SaaS S&M Spend as % of Revenue

45percent

median

Public SaaS companies

SaaS Valuation Multiple (EV / NTM Revenue)

11.5x

median

Public SaaS companies, January 2022

SaaS Valuation Multiple (EV / NTM Revenue)

15.5x

average

Public SaaS companies, 1-year trailing average as of January 2022

Sales & Marketing Spend

45percent of revenue

median

Public SaaS companies