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What's in the Offing for Cloudflare (NET) This Earnings Season?

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Cloudflare (NET - Free Report) is slated to release second-quarter 2022 results on Aug 4.

The company projects second-quarter revenues in the band of $226.5-$227.5 million. The Zacks Consensus Estimate for the top line is currently pegged at $227.5 million, indicating an improvement of 49.3% year over year.

Cloudflare expects the bottom line between break-even and a loss of a penny per share. The consensus mark for the same stands at a loss of a penny per share, suggesting an improvement from the year-ago quarter’s loss of 2 cents per share.

The web infrastructure and website security solution provider projects the non-GAAP loss from operations between $1 million and $2 million.

Cloudflare’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 83.3%.

Let’s see how things have shaped up before the upcoming announcement.

Cloudflare, Inc. Price and EPS Surprise Cloudflare, Inc. Price and EPS Surprise

Cloudflare, Inc. price-eps-surprise | Cloudflare, Inc. Quote

Factors to Consider

Cloudflare’s second-quarter performance might have benefited from the solid demand for security solutions, which became imperative due to aggravated cyberattacks, work-and-learn-from-home policies and a zero-trust approach.

The  to-be-reported quarter’s top line is likely to have witnessed the impact of the accelerated global footprint expansion outside of the United States. It is worth mentioning that the United States, the EMEA and the APAC represented 53%, 26% and 14% of total revenues, respectively, in the first quarter.

Besides, a diversified customer base might have contributed to NET’s second-quarter top line. It added around 14,013 new paying customers in the last reported quarter, bringing the total count to approximately 154,109 across more than 170 countries.

Cloudflare added 121 new large customers (annual billings of more than $100,000), taking the total count to 1,537 at the end of the first quarter, up from the 1,416 recorded at the end of the fourth quarter of fiscal 2021. This uptrend, which has prevailed for the past few quarters, is likely to have continued in the to-be-reported quarter as well, backed by the elevated demand for its cloud-based solutions amid the pandemic-led remote-working wave.

The company's recurring subscription-based business model has been providing relative stability to its top line amid pandemic-induced disruptions. It expects variability in cash flow margins due to working capital fluctuations, large enterprise business growth and seasonal factors.

However, Cloudflare’s significant exposure to small and medium businesses, the worst-hit cohort by the pandemic and ongoing geopolitical uncertainties worldwide might have weighed on its performance in the quarter to be reported.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for NET this season. The combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that’s not the case here.

Cloudflare currently carries a Zacks Rank of 4 (Sell) and has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With the Favorable Combination

Per our model, MRC Global (MRC - Free Report) , Alcon (ALC - Free Report) and Grocery Outlet (GO - Free Report) have the right combination of elements to post an earnings beat in their upcoming releases.

MRC Global is slated to report second-quarter 2022 results on Aug 8. The company sports a Zacks Rank #1 and an Earnings ESP of +30.27% at present. MRC's earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while matching the same in one, the average surprise being 140.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for MRC’s quarterly earnings is pegged at 25 cents per share, suggesting a whopping year-over-year surge of 212.5%. Its quarterly revenues are estimated to increase 23.4% year over year to $846.5 million.

Alcon sports a Zacks Rank #1 and an Earnings ESP of +1.08%. The company is expected to report second-quarter 2022 results on Aug 16. ALC's earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 21.4%.

For the second quarter, the Zacks Consensus Estimate for Alcon’s earnings is pegged at 55 cents per share, indicating a 1.8% year-over-year decline. However, revenues are expected to grow 4.4% to $2.19 billion.

Grocery Outlet carries a Zacks Rank #2 and has an Earnings ESP of +5.62. The company is anticipated to report its second-quarter 2022 results on Aug 9. Its earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 4.8%.

The Zacks Consensus Estimate for GO’s second-quarter earnings stands at 24 cents per share, suggesting a year-over-year increase of 4.4%. Grocery Outlet anticipates revenues of $859.6 million, which suggests growth of 10.8% from the year-ago quarter.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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Alcon (ALC) - free report >>

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Cloudflare, Inc. (NET) - free report >>