Cloudflare (NYSE:NET) Posts Quarterly Earnings Results, Beats Estimates By $0.04 EPS

Cloudflare (NYSE:NET) released its earnings results on Thursday. The company reported $0.38 earnings per share (EPS) for the quarter, beating the consensus estimate of $0.34 by $0.04, FiscalAI reports. Cloudflare had a negative return on equity of 3.88% and a negative net margin of 8.21%. The firm had revenue of $782.51 million for the quarter, compared to the consensus estimate of $737.16 million. During the same period in the prior year, the firm earned $0.27 EPS. The firm’s revenue was up 39.2% on a year-over-year basis.

Here are the key takeaways from Cloudflare’s conference call:

• Cloudflare reported Q3 revenue of $782.5 million, up 39% year over year, its fastest growth in nearly four years. Large-customer momentum remained strong, with dollar-based net retention rising to 122% and more than 5,000 customers now spending over $100,000 annually.
• Profitability improved alongside growth: adjusted operating income rose 60% to $137.1 million, and operating margin expanded to a record 17.5%. Management also expects to reach GAAP profitability in Q4, earlier than previously anticipated.
• Demand indicators were robust, including a record 158,000 net new paying customers, record additions across large-customer cohorts, and RPO growth of 34% year over year. Management said consumption-based revenue and customers drawing down pool-of-funds contracts faster helped drive the quarter’s upside.
• Q4 guidance calls for revenue of $845 million–$846 million, up 38% year over year; full-year 2026 revenue is expected to grow 37%. Management attributed momentum to broad demand across industries, including for security and its Workers developer platform.
• Gross margin fell 290 basis points year over year to 72.4%, which management linked in part to strong growth in the Workers platform; free-cash-flow margin also declined to 10% from 13% a year earlier. Management expects full-year network capital expenditure to remain elevated at 14%–15% of revenue.

Cloudflare Price Performance

NET stock traded down $22.79 during trading on Thursday, hitting $243.79. 8,454,470 shares of the company traded hands, compared to its average volume of 3,293,286. Cloudflare has a 1 year low of $158.83 and a 1 year high of $370.35. The stock’s 50-day simple moving average is $319.02 and its 200 day simple moving average is $249.31. The company has a quick ratio of 1.82, a current ratio of 1.82 and a debt-to-equity ratio of 1.22.

Key Cloudflare News

Here are the key news stories impacting Cloudflare this week:

• Positive Sentiment: Cloudflare reported quarterly earnings of $0.38 per share, above analyst estimates, while revenue rose 39.2% year over year to $782.51 million and also topped expectations. Zacks earnings article
• Positive Sentiment: The company raised its full-year revenue outlook to about $2.96 billion, up from its prior range of $2.86 billion to $2.87 billion, signaling confidence in continued growth. Wall Street Journal outlook article
• Neutral Sentiment: Cloudflare appointed Christian Smith as President of Revenue to lead its worldwide go-to-market organization and support its growth ambitions. Appointment announcement
• Negative Sentiment: Cloudflare fell alongside other cybersecurity stocks amid a broader pullback in AI-related shares, suggesting sector-wide selling contributed to the decline. TIKR market article
• Negative Sentiment: Valuation concerns and recent share-price weakness had weighed on sentiment ahead of earnings. This may help explain why strong results and guidance did not prevent a pullback. Invezz article

Insider Activity

In related news, CFO Thomas Seifert sold 12,500 shares of the stock in a transaction on Monday, October 19th. The shares were sold at an average price of $299.59, for a total transaction of $3,744,875.00. Following the sale, the chief financial officer directly owned 104,958 shares of the company’s stock, valued at approximately $31,444,367.22. This represents a 10.64% decrease in their ownership of the stock. The sale was disclosed in a filing with the SEC, which is available at this hyperlink. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, Director Carl Ledbetter sold 5,000 shares of Cloudflare stock in a transaction on Monday, September 14th. The shares were sold at an average price of $312.22, for a total transaction of $1,561,100.00. Following the completion of the transaction, the director directly owned 878,073 shares of the company’s stock, valued at $274,151,952.06. The trade was a 0.57% decrease in their position. Additional details regarding this sale are available in the official SEC disclosure. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Insiders sold a total of 259,057 shares of company stock valued at $79,516,905 in the last three months. 10.66% of the stock is currently owned by corporate insiders.

Wall Street Analysts Forecast Growth

NET has been the subject of several research analyst reports. Mizuho raised their price objective on Cloudflare from $260.00 to $310.00 and gave the stock an “outperform” rating in a research note on Wednesday, July 15th. Weiss Ratings reaffirmed a “sell (d-)” rating on shares of Cloudflare in a report on Thursday, October 15th. Fox Advisors lowered Cloudflare to a “neutral” rating in a research report on Tuesday. Royal Bank Of Canada increased their price target on shares of Cloudflare from $290.00 to $346.00 and gave the stock an “outperform” rating in a report on Friday, August 7th. Finally, Scotiabank increased their price target on shares of Cloudflare from $300.00 to $390.00 and gave the stock an “outperform” rating in a report on Friday, August 7th. Twenty-four analysts have rated the stock with a Buy rating, eight have issued a Hold rating and five have issued a Sell rating to the stock. Based on data from MarketBeat, Cloudflare has a consensus rating of “Moderate Buy” and a consensus price target of $333.21.

Cloudflare Company Profile

Cloudflare, Inc (NYSE: NET) provides cloud connectivity, security and performance services for websites, applications, corporate networks and other internet-connected resources. Its global network is designed to help organizations improve the reliability, speed and security of digital services while reducing the complexity of managing internet infrastructure.

The company’s offerings include content delivery and authoritative domain name system services, distributed denial-of-service protection, web application and application programming interface security, bot management, and network security tools.