HCP - HashiCorp: Well-Positioned In Booming Cloud Market

2023-12-17 03:17:23 ET

Summary

• HashiCorp's multi-cloud and open-source automation tools give it an edge in the competitive cloud computing market.
• The company's cloud-agnostic approach allows seamless integration with multiple cloud platforms, helping customers avoid vendor lock-in.
• HashiCorp's financials are improving, with steady revenue growth and improved profitability, showcasing its ability to thrive in the market.

HashiCorp (HCP) has become an integral part of the every-evolving cloud computing landscape. The company's multi-cloud and open-source automation tools have given it a clear edge in an increasingly competitive market. As cloud computing continues to gain traction in the software world, HashiCorp is uniquely positioned to capitalize on the cloud trend.

While HashiCorp has seen its valuation drop over the past few years, the company has started making steady progress.

Cloud-Agnostic Approach

The cloud industry is an increasingly multipolar industry, with a number of large players like Amazon's ( AMZN ) AWS, Microsoft's ( MSFT ) Azure, and Alphabet's ( GOOGL ) GCP dominating the space. The industry is no longer singularly dominated by AWS, which means that platform adaptability is more important than ever.

HashiCorp's cloud-agnostic and multi-platform approach is perfect for this sort of multipolar environments. The company's popular tools like Terraform, Nomad, and Vault can seamlessly integrate multiple cloud platforms at once. A single Terraform module, for instance, has the ability to incorporate both AWS and Azure providers. This is something that platform-specific infrastructure-as-code tools like AWS's CloudFormation cannot, or have trouble doing.

HashiCorp's tools allow customers to be more adaptable in the rapidly shifting cloud computing space by helping avoid vendor lock-in. If, for instance, a company that was previously a majority AWS shop decided to switch to Azure for pricing reasons, the company's DevOps team could easily make the switch with HashiCorp tools. However, if the company's DevOps teams were using vendor-specific tools, they would have to learn an entirely new set of tools in order to effectively use Azure's cloud platform.

The cloud computing space continues to grow at a rapid rate, and is no longer dominated by a single player.

Strong Community of Developers

The cloud-agnostic and open-source beginnings of HashiCorp's tools have allowed the company to gain a relatively large community of developers that are constantly looking to improve upon them. While HashiCorp is shifting away from open-source, the company still has a vibrant community of developers that are constantly giving feedback on how to improve their products.

This feedback cycle allows HashiCorp to stay ahead of the curve by continually improving its tools to meet new demands. The multi-cloud nature of HashiCorp tools allows for a larger community as developers utilizing any of the major cloud providers have the ability to use HashiCorp products like Terraform. The continual feedback from its users make it far easier for HashiCorp to iterate on its products.

Financials Remain Robust

HashiCorp's financials are improving at a steady rate. The company reported a Q3 revenue of $146.1 million, which represents a 17% YoY growth rate. The company is also experiencing significantly improved profitability at a non-GAAP net income of $5.6 million during the quarter. The company's robust top-line growth and path towards profitability is a promising sign for investors.

HashiCorp is competing against giants like AWS and Azure, all of whom have their own cloud computing tools. As such, HashiCorp growing profitability showcases the company's ability to thrive in such a competitive market. What's more, HashiCorp's tools continue to gain wide-adoption and have a good chance of becoming the standard devops tools in the cloud industry.

Significant Challenges Remain

As was previously mentioned, it is easy to forget that HashiCorp is competing against cloud computing giants themselves. These company all have their own cloud computing tools that they would like their users to use. In fact, these companies are constantly improving upon and pushing their own tools so that they can build their own walled garden of sorts.

Fortunately for HashiCorp, the cloud computing industry is becoming increasingly fragmented, which means that no matter how good platform-specific tools like CloudFormation become, demand for cloud-agnostic tools will likely always remain higher. Even if many cloud customers are vendor-locked for a specific period of time, they always have the option to change platforms in the future. Furthermore, many customers already use a combination of cloud-computing platforms for their workloads.

Conclusion

HashiCorp's compelling combination of cloud-agnostic tools, a strong developer community, and a customer-focused agenda make it a strong competitor in the fast-growing cloud-computing space. Given how large the cloud-computing space is expected to become and given HashiCorp's increasingly important role in this space, the company still has more room to grow at its current valuation of $4.49B.

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