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Cloudflare anticipates revenues between $500 million and $501 million for second-quarter 2025. The Zacks Consensus Estimate for NET’s second-quarter revenues is pegged at $500.7 million, indicating year-over-year growth of 24.87%.
For the second quarter, the company expects non-GAAP earnings of 18 cents per share. The Zacks Consensus Estimate for NET’s first-quarter earnings is pegged at 18 cents per share, reflecting a decline of 10% from the same quarter last year. The consensus mark for earnings has remained unchanged over the past 60 days.
Image Source: Zacks Investment Research
Cloudflare’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing the same on one occasion, the average surprise being 14.88%.
Our proven model does not conclusively predict an earnings beat for Cloudflare this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.
Though Cloudflare has an Earnings ESP of +3.98%, it currently carries a Zacks Rank #5 (Strong Sell). You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Factors Likely to Influence Cloudflare’s Q2 Results
Cloudflare’s second-quarter results are likely to benefit from enterprises transitioning from traditional firewall and VPN-based cybersecurity solutions to the zero-trust approach. The company’s performance is expected to have benefited from a rise in the number of high-value contracts.
Cloudflare’s revenues are expected to have been boosted by its aggressive global expansion outside the United States. It is worth mentioning that the company generated approximately 50% of its 2024 revenues outside the United States. In the first quarter of 2025, NET’s revenue contribution was 51% outside the United States.
A diversified clientele is likely to have boosted Cloudflare’s second-quarter top line. NET added around 13,105 new paying customers in the first quarter of 2025, bringing the total count to approximately 250,819.
The company also added 30 new large customers (annual billings of more than $100,000), taking the total count to 3,527 at the end of the first quarter. This rise in the customer base has prevailed for the past 15 quarters. This trend is expected to have continued in the to-be-reported quarter as well, backed by the increasing demand for NET’s cloud-based offerings amid the continuing digitalization trend.
Furthermore, growth in Cloudflare’s Workers AI inference and AI Gateway requests must have contributed to the top line in the to-be-reported quarter. Rising adoption of its Model Context Protocol server by a growing number of companies is also a tailwind.
However, amid the ongoing geopolitical and macroeconomic challenges, Cloudflare is facing difficulties in closing large deals in the pipeline, affecting its revenue recognition. These challenges stem from customer cautiousness in their IT spending and vendor onboarding due to recent policy measures of the United States. This is expected to have negatively impacted the company’s top-line growth in the to-be-reported quarter.
NET Price Performance & Stock Valuation
Year to date, shares of NET have surged 84.2%, outperforming the Zacks Internet - Software industry’s growth of 17.4%.
Image Source: Zacks Investment Research
Now, let’s look at the value NET offers investors at the current levels. NET is trading at a premium with a forward 12-month P/S of 28.58X compared with the industry’s 5.82X, reflecting a stretched valuation.
Image Source: Zacks Investment Research
Investment Consideration for Cloudflare
Cloudflare is experiencing growing traction with a pool of funding deals, where customers commit a large sum for flexible usage. These contracts can delay revenue recognition, thereby creating near-term headwinds for metrics like Dollar-Based Net Retention, which remained flat at 111% in first-quarter 2025.
Cloudflare also faces intense competition from multiple larger players across various markets. The market for web infrastructure and security services in which Cloudflare primarily operates is growing highly competitive, where several well-established players like Akamai Technologies, Inc. (AKAM - Free Report) and Amazon.com, Inc.’s (AMZN - Free Report) Amazon Web Services are vying for market share. In the cybersecurity space, NET faces formidable competition from Palo Alto Networks (PANW - Free Report) .
For instance, Akamai Technologies offers a wide range of infrastructure and security services, including Akamai Content Delivery Network solutions, EdgeWorkers, EdgeKV and Global Traffic Management. Amazon offers Amazon CloudFront, Amazon Web Services, Lambda@Edge and se curity solutions like Amazon WAF, API Gateway, and Bot Control. Furthermore, new entrants and niche players are constantly emerging, adding to the competitive pressure for Cloudflare.
Palo Alto Networks achieved 36% year-over-year growth in SASE ARR and 16% growth in $1 million-plus deals in the third quarter of fiscal 2025, making it a dominant SASE player. Furthermore, Zscaler’s presence across multiple verticals, including SASE and zero trust, along with its rapid market expansion, puts Cloudflare under pressure from market expansion and product innovation.
To survive in the highly competitive cybersecurity market, each player must continually invest in broadening its capabilities. Over the past few years, Cloudflare has invested heavily to enhance its sales and marketing capabilities, particularly by increasing its international presence. This has negatively impacted its operating margins. Cloudflare’s bottom-line growth rate is pegged at mid-single digits for the full-year 2025.
Conclusion: Sell Cloudflare Stock Now
While Cloudflare's growth prospects remain strong, its overvaluation at present poses a concern for investors. These factors are further exasperated by the delayed revenue recognition and shrinking margins. Considering these factors, we suggest that investors should stay away from NET stock at present.
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Cloudflare to Post Q2 Earnings: Time to Buy, Sell or Hold the Stock?
Key Takeaways
Cloudflare (NET - Free Report) is scheduled to report second-quarter 2025 results on July 31, 2025.
Cloudflare anticipates revenues between $500 million and $501 million for second-quarter 2025. The Zacks Consensus Estimate for NET’s second-quarter revenues is pegged at $500.7 million, indicating year-over-year growth of 24.87%.
For the second quarter, the company expects non-GAAP earnings of 18 cents per share. The Zacks Consensus Estimate for NET’s first-quarter earnings is pegged at 18 cents per share, reflecting a decline of 10% from the same quarter last year. The consensus mark for earnings has remained unchanged over the past 60 days.
Image Source: Zacks Investment Research
Cloudflare’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing the same on one occasion, the average surprise being 14.88%.
Cloudflare, Inc. Price and EPS Surprise
Cloudflare, Inc. price-eps-surprise | Cloudflare, Inc. Quote
Earnings Whispers for Cloudflare
Our proven model does not conclusively predict an earnings beat for Cloudflare this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.
Though Cloudflare has an Earnings ESP of +3.98%, it currently carries a Zacks Rank #5 (Strong Sell). You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Likely to Influence Cloudflare’s Q2 Results
Cloudflare’s second-quarter results are likely to benefit from enterprises transitioning from traditional firewall and VPN-based cybersecurity solutions to the zero-trust approach. The company’s performance is expected to have benefited from a rise in the number of high-value contracts.
Cloudflare’s revenues are expected to have been boosted by its aggressive global expansion outside the United States. It is worth mentioning that the company generated approximately 50% of its 2024 revenues outside the United States. In the first quarter of 2025, NET’s revenue contribution was 51% outside the United States.
A diversified clientele is likely to have boosted Cloudflare’s second-quarter top line. NET added around 13,105 new paying customers in the first quarter of 2025, bringing the total count to approximately 250,819.
The company also added 30 new large customers (annual billings of more than $100,000), taking the total count to 3,527 at the end of the first quarter. This rise in the customer base has prevailed for the past 15 quarters. This trend is expected to have continued in the to-be-reported quarter as well, backed by the increasing demand for NET’s cloud-based offerings amid the continuing digitalization trend.
Furthermore, growth in Cloudflare’s Workers AI inference and AI Gateway requests must have contributed to the top line in the to-be-reported quarter. Rising adoption of its Model Context Protocol server by a growing number of companies is also a tailwind.
However, amid the ongoing geopolitical and macroeconomic challenges, Cloudflare is facing difficulties in closing large deals in the pipeline, affecting its revenue recognition. These challenges stem from customer cautiousness in their IT spending and vendor onboarding due to recent policy measures of the United States. This is expected to have negatively impacted the company’s top-line growth in the to-be-reported quarter.
NET Price Performance & Stock Valuation
Year to date, shares of NET have surged 84.2%, outperforming the Zacks Internet - Software industry’s growth of 17.4%.
Image Source: Zacks Investment Research
Now, let’s look at the value NET offers investors at the current levels. NET is trading at a premium with a forward 12-month P/S of 28.58X compared with the industry’s 5.82X, reflecting a stretched valuation.
Image Source: Zacks Investment Research
Investment Consideration for Cloudflare
Cloudflare is experiencing growing traction with a pool of funding deals, where customers commit a large sum for flexible usage. These contracts can delay revenue recognition, thereby creating near-term headwinds for metrics like Dollar-Based Net Retention, which remained flat at 111% in first-quarter 2025.
Cloudflare also faces intense competition from multiple larger players across various markets. The market for web infrastructure and security services in which Cloudflare primarily operates is growing highly competitive, where several well-established players like Akamai Technologies, Inc. (AKAM - Free Report) and Amazon.com, Inc.’s (AMZN - Free Report) Amazon Web Services are vying for market share. In the cybersecurity space, NET faces formidable competition from Palo Alto Networks (PANW - Free Report) .
For instance, Akamai Technologies offers a wide range of infrastructure and security services, including Akamai Content Delivery Network solutions, EdgeWorkers, EdgeKV and Global Traffic Management. Amazon offers Amazon CloudFront, Amazon Web Services, Lambda@Edge and se curity solutions like Amazon WAF, API Gateway, and Bot Control. Furthermore, new entrants and niche players are constantly emerging, adding to the competitive pressure for Cloudflare.
Palo Alto Networks achieved 36% year-over-year growth in SASE ARR and 16% growth in $1 million-plus deals in the third quarter of fiscal 2025, making it a dominant SASE player. Furthermore, Zscaler’s presence across multiple verticals, including SASE and zero trust, along with its rapid market expansion, puts Cloudflare under pressure from market expansion and product innovation.
To survive in the highly competitive cybersecurity market, each player must continually invest in broadening its capabilities. Over the past few years, Cloudflare has invested heavily to enhance its sales and marketing capabilities, particularly by increasing its international presence. This has negatively impacted its operating margins. Cloudflare’s bottom-line growth rate is pegged at mid-single digits for the full-year 2025.
Conclusion: Sell Cloudflare Stock Now
While Cloudflare's growth prospects remain strong, its overvaluation at present poses a concern for investors. These factors are further exasperated by the delayed revenue recognition and shrinking margins. Considering these factors, we suggest that investors should stay away from NET stock at present.