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

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

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 Stock Performance

Cloudflare stock opened at $274.29 on Friday. The company has a debt-to-equity ratio of 1.22, a current ratio of 1.82 and a quick ratio of 1.82. Cloudflare has a 12 month low of $158.83 and a 12 month high of $370.35. The company has a fifty day moving average price of $319.02 and a two-hundred day moving average price of $249.31. The company has a market cap of $96.95 billion, a PE ratio of -466.68, a P/E/G ratio of 206.44 and a beta of 1.37.

Key Stories Impacting Cloudflare

Here are the key news stories impacting Cloudflare this week:

• Positive Sentiment: Cloudflare reported Q3 revenue of $782.5 million, up 39.2% year over year and above analyst expectations. Adjusted EPS of $0.38 also beat consensus. Cloudflare Q3 results and guidance
• Positive Sentiment: The company raised its full-year revenue projection to about $2.96 billion from prior guidance of $2.86–$2.87 billion. Its next-quarter revenue outlook was also stronger than analysts expected. Cloudflare raises full-year outlook
• Positive Sentiment: Enterprise adoption continued to expand: customers spending more than $100,000 annually grew 25% year over year. Management also cited record sales productivity and the company’s first “Act 4” revenue. Three takeaways for long-term investors
• Neutral Sentiment: Needham kept a Buy rating but lowered its price target to $365 from $380; Cantor Fitzgerald cut its target to $310 from $340 and maintained Neutral. The target reductions temper, but do not erase, the positive earnings signal. Needham price target
• Negative Sentiment: Despite rapid sales growth, gross margin fell, free cash flow grew more slowly than revenue, and the GAAP operating loss widened—potential concerns about profitability and the quality of growth. Cloudflare sales, margins and earnings reaction

Wall Street Analysts Forecast Growth

NET has been the subject of several recent analyst reports. Susquehanna raised their target price on Cloudflare from $200.00 to $300.00 and gave the company a “neutral” rating in a research note on Monday, August 10th. UBS Group initiated coverage on Cloudflare in a report on Tuesday. They issued a “buy” rating for the company. TD Cowen lowered Cloudflare from a “buy” rating to a “hold” rating in a research note on Tuesday. Royal Bank Of Canada raised their price objective on Cloudflare from $290.00 to $346.00 and gave the company an “outperform” rating in a research note on Friday, August 7th. Finally, Barclays lifted their price objective on Cloudflare from $355.00 to $400.00 and gave the stock an “overweight” rating in a report on Monday, October 12th. Twenty-five analysts have rated the stock with a Buy rating, eight have assigned a Hold rating and four have assigned a Sell rating to the company’s stock. According to MarketBeat.com, the stock currently has a consensus rating of “Moderate Buy” and an average price target of $333.75.

Insider Buying and Selling

In related news, Director Carl Ledbetter sold 5,000 shares of Cloudflare stock in a transaction dated Monday, September 14th. The shares were sold at an average price of $312.22, for a total value of $1,561,100.00. Following the sale, the director directly owned 878,073 shares in the company, valued at $274,151,952.06. This trade represents a 0.57% decrease in their position. The sale was disclosed in a document filed with the SEC, which is available through this hyperlink. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, CFO Thomas Seifert sold 12,500 shares of the firm’s stock in a transaction that occurred 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 completion of the sale, the chief financial officer owned 104,958 shares in the company, valued at $31,444,367.22. The trade was a 10.64% 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 worth $79,516,905 in the last three months. 10.66% of the stock is owned by insiders.

About Cloudflare

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.