The Information's TITV
00:18:11 · Paddy Srinivasan
[00:18:11] S3: Yeah. It is interesting. We had our best quarter in over ten years, and it's interesting to be bucketized in this concept of neo clouds. We are not neo, but we are a real cloud. And we have been doing this for a while. We've been public for five years. And the the differentiation on on our platform is that we are very different from a customer segmentation or target customer perspective. We don't have the the usual concentration of neo clouds. We have 680,000 paying customers, and no customer is bigger than high single digits in terms of concentration for us. So that's very different. Number two is we don't just sell GPUs. We sell a whole cloud platform. We sell a platform for agents to execute. We, of course, have a very robust leading token factory, and we have a core cloud platform with databases and data services and storage and the whole breadth of rich cloud platforms. And the third thing is we're doing this in the public market. We just guided to 60% plus growth for next year at our scale at a billion plus while being profitable, operating income profitable and cash flow positive. So we're doing it in a very, very different way. And as I said on the earnings call, we are different by design.
00:19:36 · Akash Pasricha
[00:19:36] S0: Right. So, I want to drill into that 60% forecast you guys gave because it's almost double the growth rate that you guided to for this current fiscal year. Look, And these types of growth rates for these cloud firms that are coming up, we've seen these extraordinary growth rates, but you also have a software business as well. And so as you look at that 60% growth rate, how much of it is coming from the cloud side of the business, and how much of it is coming from the software growth?
00:20:07 · Paddy Srinivasan
[00:20:07] S3: Yeah. It really is interesting question. It is becoming increasingly hard, Akash, to distinguish between just AI and cloud. And let me explain what I mean by that. For a very new neo cloud, there's only one vector of growth, which is you add more GPU capacity, and you rent that GPU capacity with a markup. So that is one business model in today's AI world. And the market is starting to question that business model because the cost of borrowing to put this gear on the ground is growing by the week, with interest rates being at the levels that they are in. And number two is there's a huge pushback on data center projects, at least in this country. Right? We are very different in the sense that we have two sides of the equation. We have P times Q is our total yield on the megawatts we energize. Q, of course, is real capacity, but P is the price and the yield we can get on the capacity we are bringing online. Since we are a software enabled infrastructure platform, we have multiple ways of monetizing the hardware that we buy and energize. So we have a rich software platform. We are already at $18,000,000 per megawatt for our entire fleet, which is significantly more than the other providers. And I'm talking about the entire fleet, not just one customer or one data center. So that's a very, very important distinction for us because we monetize software and not just raw hardware.
00:21:44 · Akash Pasricha, Paddy Srinivasan
[00:21:44] S0: And help me understand. So $18,000,000,000 per megawatt. So when you say yield per megawatt, that's... At the end of the day, that's what you're taking home is higher than what the other Neo Clouds might be offering? Or is it is it higher pricing? Like, just break down that metric for us. [00:22:03] S3: Yeah. It is not higher pricing. It is... We make $18,000,000 per megawatt on a blended basis for all of our hardware. And the reasons for that, the the reason why we command a premium is not because our prices are high, our prices are very competitive, but we have multiple ways of monetizing it, Akash. So we, of course, we we can sell GPUs, but we don't do that very often. We sell services, software services on top of that so that we can monetize our hardware in different ways. Like, we sell data services. We sell compute agent sandbox services on top of our infrastructure. We sell tokens on top of our GPU infrastructure. So all these are software enabled infrastructure plays where we can get a premium on top of others who are just renting their hardware. [00:22:53] S0: And so maybe this sort of relates to that, but then what gives you confidence once compute prices start to stabilize in this supply and demand environment? What gives you confidence that you will still be able to command the same demand once these dynamics equalize?
00:22:53 · Akash Pasricha, Paddy Srinivasan
[00:22:53] S0: And so maybe this sort of relates to that, but then what gives you confidence once compute prices start to stabilize in this supply and demand environment? What gives you confidence that you will still be able to command the same demand once these dynamics equalize? [00:23:14] S3: Yeah. So, I'm very confident because what we are monetizing is software and not just hardware. The need for more sophisticated software is increasing by the day because most companies are moving into productionizing agentic systems. And agents need memory, services, agents need complex orchestration, agents need secure operating environments called sandboxes. So there is a significant amount of software value addition that we provide which is not easily copyable. So as the supply demand imbalance kind of reaches an equilibrium over the next eighteen, twenty four months, we'll see if it reaches there in the next couple of years with many data center projects getting into scrutiny. I think we will probably be in this supply demand imbalance for longer than we want to. But regardless, we feel confident because we are a software company and we are monetizing a software platform, not just reselling hardware. [00:24:20] S0: Will that scrutiny comes maybe in an increased form because of the election results, will that scrutiny affect your data center ambitions at all? You talked about the facilities that are coming online for your own business on the earnings call.
00:24:20 · Akash Pasricha, Paddy Srinivasan
[00:24:20] S0: Will that scrutiny comes maybe in an increased form because of the election results, will that scrutiny affect your data center ambitions at all? You talked about the facilities that are coming online for your own business on the earnings call. [00:24:33] S3: Yeah, exactly. So we are very, very careful, Akash, in terms of the data center partners that we work with. We try to work with tier one data center providers that have been doing this for dozens of years, and we are very careful in selecting campuses for the most part that are already built. So most of the data center capacity that we have announced coming online in 2027 are already in campuses that are already energized and permitted in tariff. So we are adding a data hall or we are adding an adjacent building in an existing data center campus. We are not in this, Oh, let's bring on a gigawatt of new facility where we have to break ground and work with the local county and things like that. So we typically work with data center providers who are really top notch and who have been doing this development for a number of years. And we try to stay away from the hotspots of extreme data center scrutiny in the country today.