Cohesity is like a three-tier company, with the tiers growing larger as new growth opportunities emerge.
This was a perception that resulted from a conversation with CEO Sanjay Poonen. He said Cohesity stared out as an enterprise backup and restore, data protection company, built round a file system that provided great performance, scale and extensibility. Over the past few years a second security tier of offerings has been added to it. We could view backup as relatively mature but still with growth prospects, such as protecting customer data in SaaS applications.
For Cohesity another possible expansion opportunity could be to move into small and medium business backup, Veeam territory so to speak. It could, for example, buy its way in by acquiring an existing supplier; we suggested N-able as a for instance. Poonen didn’t react positively to this idea. M & A activity wasn’t ruled out in general, but there would need to be specific advantages in particular situations, not a new market sector entry. We were left thinking that technology tuck-ins were more likely than any acquisition of an existing SMB data protection supplier.
Security can be viewed in maturity terms as a young adult with a lot of scope for growth as Cohesity and its fellow suppliers develop functionality to identify malware, detect, deflect and stop attacks, and facilitate recovery. Think of products like immutable backup vaults and threat hunting software. There’s more to be done. With the continued onslaught of phishing and other credential-stealing attacks, there is scope for more user validation activities.
AI is its third and youngest tier, with enormous scope for growth as retrieval-augmented generation (RAG) for Large Language Models (LLMs) has lead to AI Agents and onwards to interacting agents. Poonen pointed out that, because of Cohesity’s filesystem, the security functionality in the middle tier can be applied to the backup data and to users accessing the backup data.
As its Gaia AI functionality is developed then it has been applied to the file system and thus to the hundreds of exabytes of backup data that Cohesity has accumulated for its customers. Gaia is being used to make Cohesity’s backup and security operations more efficient and more easily queried and managed by customers. Cohesity is also extending the use of its data by feeding selected parts of it to big data and AI analytics data warehouse and lake suppliers such as Databricks and Snowflake.
That’s its AI pipeline role. It has no interest in becoming an analytics company itself. Poonen said Databricks could query and search its own real-time data and complement that with a customer’s historical data held in a Cohesity repository. The multi-hundred exabyte size of Cohesity’s overall repository makes it a valuable Databricks partner.
The Veritas acquisition added significantly to this, and gave Cohesity the leading share of the backup market. Once Cohesity engineers had extended Veritas’ data mover to write backups to the Cohesity file system then Cohesity’s security and AI functionality could automatically be applied to the Veritas user’s data, providing features lacking in Veritas’ own products.
Poonen said that, prior to the acquisition, Veritas had a substantial enterprise customer base and was highly profitable but it was a low growth business with limited technology development. Cohesity, on the other hand was a high-growth company with a great deal of technology development but limited profitability. Put the two together and you have a triple combination of growth, development and profitability. Cohesity, said Poonen: “has no need to raise money.”
We asked about an IPO and he was, as expected, fairly non-committal. Recent IPOs had been quite successful, when the time was right, etc. He pointed out that most maturing industries settle around three or four leading players who collectively have a dominating market share. In servers we have Dell, HPE, Lenovo and CIsco. With disk drives we see Western Digital, Seagate and Toshiba.
So, in backup, Poonen views Cohesity, Commvault, Rubrik and Veeam as the big four.
He sees the same situation at play in the market sectors into which Cohesity sells: finance, health, etc. There will be leading suppliers there, and he talked with some enthusiasm about a case study marketing approach to prospective customers in a sector. Cohesity would gain one or two of the big players as a customer and then tell others what these leaders were doing with Cohesity. That way brand awareness spreads and sales follow because customers tend to follow the leaders in their sector.
Cohesity, as far as Poonen is concerned, is a growth-focused company. He wants more customers, more product and service sales to existing customers, more AI functionality – basically more everywhere in Cohesity’s business. We could characterise this business as mature backup expanding sideways within its sector, by adding functionality such as MongoDB support, young middle-age security growing upwards as well as expanding sideways, and youngster AI growing furiously both upwards and outwards at a fast clip. All three tiers are getting larger and, we expect, a Cohesity IPO is getting closer, but not this year.
