Usage is the first line a budget trims

Usage-based pricing grows automatically when customers do well. When they tighten budgets, it is also the easiest cost to cut, because trimming usage needs no renegotiation, just an engineer tuning a workload.

Optimisation cycles

In good times, customers expand usage freely and revenue rises with them. In a tighter spell, finance teams ask engineers to optimise, and they do: caching more, calling less, moving some workloads elsewhere. None of that shows up as churn. It shows up as slower growth from customers who are perfectly happy.

That makes the revenue more cyclical than a subscription business of the same size.

What I'm watching

• Net revenue retention, which captures optimisation
• Commentary on customer optimisation efforts
• New product revenue, which could offset slower growth in the core

Where I stand

Short, on revenue that is more exposed to budget cycles than the valuation assumes. The customers are loyal; their usage is not fixed.

What would change my mind

Net retention rising while budgets are still tight. That would mean new products are growing faster than optimisation can trim, and the model is less cyclical than I think.