Here We Go

That’s something CEO Matthew Prince just noted on today’s conference call.

“Congratulations on a really solid quarter. Definitely it looks like the engine is back to running full speed here.”

The key theme around Cloudflare’s earnings is whether Wall Street believes a significant reacceleration is happening. Quotes like this are extremely bullish.

“Our dollar-based net retention was 114% in up 3% quarter-over-quarter. Our gross margin was 76.3%, in line with our long-term target range of 75% to 77%. We delivered an operating profit of $72.3 million, representing an operating margin of 14.1% and we generated strong free cash flow of $33.3 million during the quarter, again exceeding expectations. Cloudflare keeps innovating faster than ever and customers are voting with their wallets, you can see that in the momentum from our Q2 results. It’s not just interest, it’s real investments that drove record ACV bookings in the quarter.”

“We had an excellent quarter. We crossed $2 billion in annual run rate revenue, achieving $512.3 million of revenue in the quarter. We started the year detailing our strategy to drive reaccelerating growth. Our Q2 results highlight that this formula is working and mark a key inflection point for the company, with revenue growing 28% year-over-year, up from 26.5% in the first quarter. We now have 3,712 customers paying us more than $100,000 per year, a 22% increase year-over-year. Revenue contribution from these large customers grew at 35% year-over-year, contributing to 71% of revenue during the quarter, up from 67% in the second quarter last year. ” – Matthew Prince

That’s the key idea – is Cloudflare at an inflection point? Our bet is that it is. If growth keeps scaling past 30%, even with a sky high valuation, its likely Cloudflare shares will soar in the years ahead.

Cloudflare’s conference call is coming soon. We’ll post highlights.

To receive them: simply leave this blog open and an update will post after we’ve been able to listen in.

• Apple: Up 2.2%
• Amazon:  Down 3.1%
• Cloudflare: Up 5.5%
• Roku: Up 2%
• Reddit: Up 20.5%

• “We kicked off 2025 with confidence, momentum, and strong results. In Q1, we landed the largest contract in Cloudflare’s history, a more than $100 million deal driven by our Workers developer platform, and signed the longest-term SASE contract to date.”

  Matthew Prince

• “We have the scale, the technology, and the team to capture the massive opportunity ahead of us—as evidenced by the size and the length of the deals we’re closing and the caliber of customers betting on Cloudflare.”

  Matthew Prince

• “In a constantly changing world, one thing’s for certain: innovation wins. From networking, to security, to AI, Cloudflare is the envy of the industry for innovation, and there’s no slowing down.”

  Matthew Prince

We’ll see if commentary on Cloudflare’s earnings moves the stock more, but for now gains have settled in at around 7%.

Next quarter Cloudflare posted guidance of $543.5 to $544.5M, that’s above expectations.

NET | Cloudflare Q2’25 Earnings Highlights:

• Adj. EPS: $0.21 [✅]; UP +5% YoY
• Revenue: $512.3B [✅]; UP +28% YoY
• Adj. Gross Margin: 76.3% [⚠️]; DOWN -270 bps YoY
• Net Income: -$50.4M [❌]; DOWN -234% YoY
• Free Cash Flow: $33.3M; DOWN -13% YoY

Outlook:

• Revenue: $543.5 to $544.5M [✅]
  • Cloudflare expects continued strong demand, driven by larger and longer-term contracts with key customers.
  • The company is focused on innovation and expanding its product offerings to capture more market share.

Q2 Segment Performance:

• Revenue from Core Services: $512.3M [✅]; UP +28% YoY

Other Key Q2 Metrics:

• Adj. Operating Income: $72.3M [✅]; UP +27% YoY
• Adj. Operating Expenses: $450.9M [✅]; UP +30% YoY
• Cash, Cash Equivalents, and Available-for-Sale Securities: $3,959.7M
• Effective Tax Rate: 6.7% (vs. 8.0% YoY)

CEO Commentary:

• Matthew Prince: “We had an excellent second quarter, exceeding $2 billion in annualized revenue while also reaccelerating revenue growth to 28% year-over-year. We’re innovating faster than ever, and demand remains strong, as our largest customers grow their investments with Cloudflare at the highest levels we’ve seen since 2022. While we’ve continued to sign even bigger and longer deals, some of our most strategic wins have been centered around our work to help invent the new business model for content creators on the AI-driven Internet. Sitting in front of more than 20% of all websites—with more than half of our dynamic traffic flowing through APIs—Cloudflare is uniquely positioned to enable the agentic web of the future. We are firing on all cylinders, with the right technology, strategy, and team to accelerate the next phase of growth for Cloudflare and for the Internet at-large.”

Strategic Updates:

• Cloudflare is focusing on expanding its product offerings and enhancing its technology to better serve its customers and capture new market opportunities.

Cloudflare shares are now up 6%

Revenue: $512.3M VS $501M Estimate

EPS: $0.21 VS $0.18 Estimate

Cloudflare earnings just dropped. Initially the stock dropped, and then immediately flipped positive. We’re going ot post live news and analysis.

We’re just 20 minutes from the closing bell. Most stocks are in the red today with S&P 500 down .2% and the Dow Jones dropping .54%.

Yet, stocks closely aligned with the AI trade have held onto gains. Microsoft’s stunning Azure numbers yesterday have helped Cloudflare shares trade sharply positive. The company is up 3.5% in late trading.

As we’ve noted throughout this blog, without a beat and raise, Cloudflare shares will likely be down tomorrow.

Cloudflare closed at $200.85 on Tuesday — up more than 75% since May 1. That rally reflects bullish sentiment around its AI platform, SASE expansion, and large enterprise wins.

But with valuation stretched, the market is now pricing in not just strong Q2 execution, but raised full-year guidance. Anything short of an outlook above $2.1B could lead to a fade — especially with tech volatility picking up.

The setup demands strength on both topline and forward commentary. Another “beat and reiterate” might not be enough to get the stock ripping higher.

Cloudflare has steadily delivered modest EPS beats, but stock reactions have varied — with the strongest gains following Q3 2024. Investors are highly tuned to forward guidance and AI-driven revenue opportunities.

Here’s Wall Street’s consensus expectations for Q2 earnings.

• Revenue: $501.6 million
• Adjusted EPS: $.18
• Gross Margin: 77.8%
• Free Cash Flow: $29.9 million

More importantly, Cloudflare will likely need to raise forward guidance if shares are going to rise tomorrow.

In the third quarter, Wall Street expects:

• Revenue: $538.6 million
• Adjusted EPS: $.21

And the company could also raise 2025 growth targets. Currently, Cloudflare is projecting sales of $2.090 billion to $2.094 billion. Wall Street expectations are slightly above that range at $2.096 billion.

If Cloudflare took revenue guidance for the year beyond $2.1 billion, that could be enough for shares to rise again tomorrow.