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Cloudflare Q1 Earnings Top, Revenues Soar on Large Customer Additions
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Key Takeaways
NET posted Q1 non-GAAP EPS of 25 cents on revenues of $639.8M, both above expectations.
Cloudflare added 118 $100K customers; 4,416 now generate about 72% of Q1 revenues.
Cloudflare plans 1,100 job cuts for an agentic AI-first model, with $140-$150M charges mostly in Q2.
Cloudflare, Inc. (NET - Free Report) started 2026 on a strong note, reporting better-than-expected first-quarter results. The company posted non-GAAP earnings of 25 cents per share, beating the Zacks Consensus Estimate by 8.7%. Quarterly earnings jumped 56.3% year over year and came above the earlier guidance of 23 cents per share.
Cloudflare’s revenues rose 34% year over year to $639.8 million and surpassed the consensus mark by 2.87%. The year-over-year improvement in revenues can be attributed to sustained momentum in onboarding large new enterprise customers, remarkable progress in the public sector, continued high prioritization of security by its customers and a zero-trust approach.
Cloudflare outpaced the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 11.62%.
Cloudflare, Inc. Price, Consensus and EPS Surprise
Cloudflare’s Q1 Revenue Mix Points to Broad-Based Demand
Cloudflare’s top-line performance was positively impacted by its mix of customer segments (Channel Partners and Direct Customers). Revenues from Channel Partners (30% of total revenues) were $193 million, up 71% year over year. First-quarter revenues from Direct Customers (70% of total revenues) were $446.8 million, up 22% year over year.
During the first quarter, Cloudflare added 118 new customers who contributed more than $100,000 in annual revenues. The total count of such customers reached 4,416 at the end of the quarter. These customers accounted for approximately 72% of the company’s first-quarter total revenues.
Dollar-based net retention rate was 118% at the end of the first quarter, up from 111% in the year-ago quarter but down from 120% in the previous quarter.
Cloudflare’s first-quarter non-GAAP gross profit increased 26% year over year to $465.7 million. However, the non-GAAP gross margin contracted 430 basis points (bps) year over year to 72.8%.
Non-GAAP operating income for the quarter jumped 30.5% year over year to $73.1 million. The non-GAAP operating margin contracted 30 bps to 11.4%.
NET Reshapes Operating Model Around Agentic AI
Management paired the first quarter’s results with a notable operational shift. Cloudflare outlined actions to accelerate its evolution to an agentic AI-first operating model, including an expected workforce reduction of approximately 1,100 people.
The company expects restructuring charges of $140 million to $150 million, primarily tied to cash expenditures for notice periods, severance and related costs, along with non-cash expenses tied to stock-based awards. Most charges are expected in the second quarter of 2026, with the plan substantially complete by the end of the third quarter, as Cloudflare aims to increase speed and innovation while reshaping internal productivity.
Cloudflare’s Balance Sheet & Cash Flow
As of March 31, 2026, Cloudflare had cash, cash equivalents and available-for-sale securities of $4.16 billion, up from $4.1 billion as of Dec. 31, 2025.
Cloudflare generated an operating cash flow of $158.3 million and a free cash flow of $84.1 million during the first quarter.
Cloudflare Raises FY26 Guidance
Buoyed by a strong first-quarter performance, Cloudflare raised its guidance for full-year 2026. The company now anticipates 2026 revenues between $2.805 billion and $2.813 billion, up from the previous guidance of $2.785-$2.795 billion. The consensus mark for revenues is pegged at $2.8 billion, suggesting a year-over-year rise of 29.3%.
Non-GAAP income from operations is now projected in the range of $418-$421 million, up from the earlier projection of $378-$382 million. Non-GAAP earnings per share are now anticipated to be in the band of $1.19-$1.20, up from the previous guidance of $1.11-$1.12. The Zacks Consensus Estimate for earnings is pegged at $1.13, indicating a year-over-year jump of 21.5%.
Cloudflare initiates guidance for the second quarter of 2026. NET expects revenues in the $664-$665 million range for the second quarter. The Zacks Consensus Estimate for revenues is pegged at $664.3 million, suggesting a year-over-year rise of 29.7%.
Non-GAAP income from operations in the second quarter is expected to be between $90 million and $91 million. Non-GAAP earnings are anticipated to be 27 cents per share. The Zacks Consensus Estimate for earnings is pegged at 27 cents per share, calling for a year-over-year increase of 28.6%.
The Zacks Consensus Estimate for Micron Technology’s fiscal 2026 earnings has been revised upward by a penny to $58.37 per share in the past 30 days, suggesting an increase of 604.1% from fiscal 2025’s reported figure. Micron Technology shares have surged 125.3% year to date (YTD).
The Zacks Consensus Estimate for Broadcom’s fiscal 2026 earnings has moved northward by 9 cents to $11.45 per share over the past 30 days and calls for a year-over-year jump of 67.9%. Broadcom shares have soared 19.2% YTD.
The Zacks Consensus Estimate for NVIDIA’s fiscal 2027 earnings has moved upward by 4 cents to $8.07 per share in the past 30 days, implying a year-over-year improvement of approximately 69.2%. NVIDIA shares have risen 13.6% YTD.
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Cloudflare Q1 Earnings Top, Revenues Soar on Large Customer Additions
Key Takeaways
Cloudflare, Inc. (NET - Free Report) started 2026 on a strong note, reporting better-than-expected first-quarter results. The company posted non-GAAP earnings of 25 cents per share, beating the Zacks Consensus Estimate by 8.7%. Quarterly earnings jumped 56.3% year over year and came above the earlier guidance of 23 cents per share.
Cloudflare’s revenues rose 34% year over year to $639.8 million and surpassed the consensus mark by 2.87%. The year-over-year improvement in revenues can be attributed to sustained momentum in onboarding large new enterprise customers, remarkable progress in the public sector, continued high prioritization of security by its customers and a zero-trust approach.
Cloudflare outpaced the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 11.62%.
Cloudflare, Inc. Price, Consensus and EPS Surprise
Cloudflare, Inc. price-consensus-eps-surprise-chart | Cloudflare, Inc. Quote
Cloudflare’s Q1 Revenue Mix Points to Broad-Based Demand
Cloudflare’s top-line performance was positively impacted by its mix of customer segments (Channel Partners and Direct Customers). Revenues from Channel Partners (30% of total revenues) were $193 million, up 71% year over year. First-quarter revenues from Direct Customers (70% of total revenues) were $446.8 million, up 22% year over year.
During the first quarter, Cloudflare added 118 new customers who contributed more than $100,000 in annual revenues. The total count of such customers reached 4,416 at the end of the quarter. These customers accounted for approximately 72% of the company’s first-quarter total revenues.
Dollar-based net retention rate was 118% at the end of the first quarter, up from 111% in the year-ago quarter but down from 120% in the previous quarter.
Cloudflare’s first-quarter non-GAAP gross profit increased 26% year over year to $465.7 million. However, the non-GAAP gross margin contracted 430 basis points (bps) year over year to 72.8%.
Non-GAAP operating income for the quarter jumped 30.5% year over year to $73.1 million. The non-GAAP operating margin contracted 30 bps to 11.4%.
NET Reshapes Operating Model Around Agentic AI
Management paired the first quarter’s results with a notable operational shift. Cloudflare outlined actions to accelerate its evolution to an agentic AI-first operating model, including an expected workforce reduction of approximately 1,100 people.
The company expects restructuring charges of $140 million to $150 million, primarily tied to cash expenditures for notice periods, severance and related costs, along with non-cash expenses tied to stock-based awards. Most charges are expected in the second quarter of 2026, with the plan substantially complete by the end of the third quarter, as Cloudflare aims to increase speed and innovation while reshaping internal productivity.
Cloudflare’s Balance Sheet & Cash Flow
As of March 31, 2026, Cloudflare had cash, cash equivalents and available-for-sale securities of $4.16 billion, up from $4.1 billion as of Dec. 31, 2025.
Cloudflare generated an operating cash flow of $158.3 million and a free cash flow of $84.1 million during the first quarter.
Cloudflare Raises FY26 Guidance
Buoyed by a strong first-quarter performance, Cloudflare raised its guidance for full-year 2026. The company now anticipates 2026 revenues between $2.805 billion and $2.813 billion, up from the previous guidance of $2.785-$2.795 billion. The consensus mark for revenues is pegged at $2.8 billion, suggesting a year-over-year rise of 29.3%.
Non-GAAP income from operations is now projected in the range of $418-$421 million, up from the earlier projection of $378-$382 million. Non-GAAP earnings per share are now anticipated to be in the band of $1.19-$1.20, up from the previous guidance of $1.11-$1.12. The Zacks Consensus Estimate for earnings is pegged at $1.13, indicating a year-over-year jump of 21.5%.
Cloudflare initiates guidance for the second quarter of 2026. NET expects revenues in the $664-$665 million range for the second quarter. The Zacks Consensus Estimate for revenues is pegged at $664.3 million, suggesting a year-over-year rise of 29.7%.
Non-GAAP income from operations in the second quarter is expected to be between $90 million and $91 million. Non-GAAP earnings are anticipated to be 27 cents per share. The Zacks Consensus Estimate for earnings is pegged at 27 cents per share, calling for a year-over-year increase of 28.6%.
Cloudflare’s Zacks Rank and Stocks to Consider
Currently, NET carries a Zacks Rank #3 (Hold).
Some better-ranked stocks worth considering in the broader Zacks Computer and Technology sector are Micron Technology (MU - Free Report) , Broadcom (AVGO - Free Report) and NVIDIA (NVDA - Free Report) . Micron Technology sports a Zacks Rank #1 (Strong Buy) at present, while Broadcom and NVIDIA each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Micron Technology’s fiscal 2026 earnings has been revised upward by a penny to $58.37 per share in the past 30 days, suggesting an increase of 604.1% from fiscal 2025’s reported figure. Micron Technology shares have surged 125.3% year to date (YTD).
The Zacks Consensus Estimate for Broadcom’s fiscal 2026 earnings has moved northward by 9 cents to $11.45 per share over the past 30 days and calls for a year-over-year jump of 67.9%. Broadcom shares have soared 19.2% YTD.
The Zacks Consensus Estimate for NVIDIA’s fiscal 2027 earnings has moved upward by 4 cents to $8.07 per share in the past 30 days, implying a year-over-year improvement of approximately 69.2%. NVIDIA shares have risen 13.6% YTD.