We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Cloudflare Q2 Earnings Beat Estimates on Large Customer Growth
Read MoreHide Full Article
Key Takeaways
Cloudflare's Q2 revenues rose 35.9% to $696.1 million, while non-GAAP EPS increased 38.1% to 29 cents.
NET ended Q2 with 4,698 large customers, up 27%, as large accounts generated 73% of quarterly revenues.
Cloudflare projects 2026 revenues of $2.864B-$2.870B, with non-GAAP EPS of $1.25-$1.26.
Cloudflare, Inc. (NET - Free Report) reported second-quarter 2026 non-GAAP earnings of 29 cents per share, which rose 38.1% year over year and topped the Zacks Consensus Estimate by 7.4%. Revenues climbed 35.9% to $696.1 million and surpassed the consensus mark by 4.6%.
Growth was supported by strong large-customer additions, rapid adoption of the Workers developer platform and solid go-to-market execution. Dollar-based net retention reached 120%, improving 2 percentage points sequentially and 6 points year over year.
NET's Large Customer Momentum Accelerates
Cloudflare ended the quarter with 4,698 customers generating more than $100,000 in annualized revenues, up 27% year over year. The company added 282 large customers sequentially and a record 986 over the past 12 months.
Large customers accounted for 73% of quarterly revenues compared with 71% a year earlier. NET also recorded its highest-ever year-over-year net additions across every large-customer tier, ranging from more than $100,000 to more than $5 million in annualized revenues.
Cloudflare, Inc. Price, Consensus and EPS Surprise
The United States generated 51% of total revenues and grew 41% year over year. EMEA contributed 27% of revenues, rising 30%, while APAC represented 14% and advanced 32%.
Customer acquisition also remained strong. Cloudflare added more than 80,000 paying customers during the quarter, driving 74% year-over-year growth in the paying-customer base. Management said new-customer bookings increased at the fastest pace in more than five years, while new pipeline generation continued to accelerate.
NET Improves Sequential Profitability
Non-GAAP gross profit totaled $508.9 million, with gross margin of 73.1%. The margin improved 30 basis points sequentially, marking the first sequential expansion in eight quarters, although it declined 320 basis points from the year-ago period.
Non-GAAP operating income increased 32.9% year over year to $96.1 million. The corresponding operating margin was 13.8%, up 240 basis points sequentially but down 30 basis points year over year. Operating expenses represented 59% of revenues, down 3 percentage points from a year earlier.
Cloudflare's AI Platform Gains Traction
Cloudflare ended the quarter with more than 7.4 million developers on its platform after adding nearly 2 million during the second quarter alone. Management highlighted rapid growth in Workers and agentic workloads as key contributors to business momentum.
The company also said more than half of the traffic flowing across its network during the quarter was nonhuman. Cloudflare is expanding its infrastructure for agent-driven activity through products such as Monetization Gateway, wallets and cloudflare.pay while positioning its developer platform for AI applications and machine-to-machine traffic.
NET Generates Strong Cash Flow
Free cash flow increased 69.4% year over year to $56.4 million and represented 8% of revenues compared with $33.3 million and 6% of revenues in the prior-year quarter. Network capital expenditures represented 7% of revenues.
Cloudflare finished June with $4.16 billion in cash, cash equivalents and available-for-sale securities. Remaining performance obligations reached $2.73 billion, up 38% year over year and 7% sequentially. Current remaining performance obligations represented 64% of the total and increased 35% year over year.
Cloudflare Provides Strong 2026 Outlook
For the third quarter of 2026, Cloudflare expects revenues between $736 million and $737 million, implying growth of about 31% year over year. Non-GAAP operating income is projected between $129 million and $130 million, while non-GAAP earnings are expected to be 34 cents per share.
For 2026, revenues are projected between $2.864 billion and $2.870 billion, representing roughly 32% year-over-year growth. Non-GAAP operating income is expected between $443 million and $445 million, while non-GAAP earnings are forecast in the range of $1.25-$1.26 per share.
NET’s Zacks Rank & Other Stocks to Consider
Cloudflare currently carries a Zacks Rank #2 (Buy).
Shares of Lumentum have surged 127.4% year to date. The Zacks Consensus Estimate for LITE’s fiscal 2026 earnings is pegged at $8.19 per share, up by 5 cents over the past 30 days, indicating an increase of 297.6% year over year.
Shares of Applied Materials have jumped 105.2% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.17 per share, up by 3 cents over the past seven days, suggesting a rise of 29.2% year over year.
Analog Devices shares have rallied 39.1% year to date. The Zacks Consensus Estimate for ADI’s fiscal 2026 earnings is pegged at $12.42 per share, up by 10 cents over the past 30 days, implying an increase of 59.4% year over year.
View the Zacks #1 Rank List
Image: Bigstock
Cloudflare Q2 Earnings Beat Estimates on Large Customer Growth
Key Takeaways
Cloudflare, Inc. (NET - Free Report) reported second-quarter 2026 non-GAAP earnings of 29 cents per share, which rose 38.1% year over year and topped the Zacks Consensus Estimate by 7.4%. Revenues climbed 35.9% to $696.1 million and surpassed the consensus mark by 4.6%.
Growth was supported by strong large-customer additions, rapid adoption of the Workers developer platform and solid go-to-market execution. Dollar-based net retention reached 120%, improving 2 percentage points sequentially and 6 points year over year.
NET's Large Customer Momentum Accelerates
Cloudflare ended the quarter with 4,698 customers generating more than $100,000 in annualized revenues, up 27% year over year. The company added 282 large customers sequentially and a record 986 over the past 12 months.
Large customers accounted for 73% of quarterly revenues compared with 71% a year earlier. NET also recorded its highest-ever year-over-year net additions across every large-customer tier, ranging from more than $100,000 to more than $5 million in annualized revenues.
Cloudflare, Inc. Price, Consensus and EPS Surprise
Cloudflare, Inc. price-consensus-eps-surprise-chart | Cloudflare, Inc. Quote
Cloudflare Sees Broad Geographic Growth
The United States generated 51% of total revenues and grew 41% year over year. EMEA contributed 27% of revenues, rising 30%, while APAC represented 14% and advanced 32%.
Customer acquisition also remained strong. Cloudflare added more than 80,000 paying customers during the quarter, driving 74% year-over-year growth in the paying-customer base. Management said new-customer bookings increased at the fastest pace in more than five years, while new pipeline generation continued to accelerate.
NET Improves Sequential Profitability
Non-GAAP gross profit totaled $508.9 million, with gross margin of 73.1%. The margin improved 30 basis points sequentially, marking the first sequential expansion in eight quarters, although it declined 320 basis points from the year-ago period.
Non-GAAP operating income increased 32.9% year over year to $96.1 million. The corresponding operating margin was 13.8%, up 240 basis points sequentially but down 30 basis points year over year. Operating expenses represented 59% of revenues, down 3 percentage points from a year earlier.
Cloudflare's AI Platform Gains Traction
Cloudflare ended the quarter with more than 7.4 million developers on its platform after adding nearly 2 million during the second quarter alone. Management highlighted rapid growth in Workers and agentic workloads as key contributors to business momentum.
The company also said more than half of the traffic flowing across its network during the quarter was nonhuman. Cloudflare is expanding its infrastructure for agent-driven activity through products such as Monetization Gateway, wallets and cloudflare.pay while positioning its developer platform for AI applications and machine-to-machine traffic.
NET Generates Strong Cash Flow
Free cash flow increased 69.4% year over year to $56.4 million and represented 8% of revenues compared with $33.3 million and 6% of revenues in the prior-year quarter. Network capital expenditures represented 7% of revenues.
Cloudflare finished June with $4.16 billion in cash, cash equivalents and available-for-sale securities. Remaining performance obligations reached $2.73 billion, up 38% year over year and 7% sequentially. Current remaining performance obligations represented 64% of the total and increased 35% year over year.
Cloudflare Provides Strong 2026 Outlook
For the third quarter of 2026, Cloudflare expects revenues between $736 million and $737 million, implying growth of about 31% year over year. Non-GAAP operating income is projected between $129 million and $130 million, while non-GAAP earnings are expected to be 34 cents per share.
For 2026, revenues are projected between $2.864 billion and $2.870 billion, representing roughly 32% year-over-year growth. Non-GAAP operating income is expected between $443 million and $445 million, while non-GAAP earnings are forecast in the range of $1.25-$1.26 per share.
NET’s Zacks Rank & Other Stocks to Consider
Cloudflare currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader Zacks Computer and Technology sector are Lumentum (LITE - Free Report) , Applied Materials (AMAT - Free Report) and Analog Devices (ADI - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Lumentum have surged 127.4% year to date. The Zacks Consensus Estimate for LITE’s fiscal 2026 earnings is pegged at $8.19 per share, up by 5 cents over the past 30 days, indicating an increase of 297.6% year over year.
Shares of Applied Materials have jumped 105.2% year to date. The Zacks Consensus Estimate for AMAT’s fiscal 2026 earnings is pegged at $12.17 per share, up by 3 cents over the past seven days, suggesting a rise of 29.2% year over year.
Analog Devices shares have rallied 39.1% year to date. The Zacks Consensus Estimate for ADI’s fiscal 2026 earnings is pegged at $12.42 per share, up by 10 cents over the past 30 days, implying an increase of 59.4% year over year.