Cloudflare's Q2 Earnings Surge: AI Initiatives and Strong Growth Boost Performance

Cloudflare beats second quarter estimates with strong revenue and customer growth - SiliconANGLE

Cloudflare beats second quarter estimates with strong revenue and customer growth Shares in Cloudflare Inc. were up more than 5% in late trading today after the content delivery networking company impressed investors with earnings and revenue beats in its fiscal second quarter and offered forecasts higher than expected. For the quarter that ended on June 30, Cloudflare reported adjusted earnings per share of 21 cents, up from 20 cents per share in the same quarter of 2024, on revenue of $512.3 million, up 28% year-over-year. Analysts had been expecting 18 cents per share and revenue of $501.21 million. Cloudflare's solid figures were driven by customer growth, with the company reporting 265,929 paying customers as of the end of June, up 27% year-over-year. Large customers - those spending $100,000 or more in annual recurring revenue - were also up 22% to 3,712. Cloudflare's customers are also sticking around, with the company reporting a very healthy retention rate of 114%, up from 112% in the second quarter of 2024. Net cash flow in the quarter from operating activities came in at $99.8 million, up from $74.8 million in the same quarter of 2024 and Cloudflare ended the quarter with $3.96 billion in cash, cash equivalents and available-for-sale on hand. Business highlights in the quarter included an announcement on April 7 that Cloudflare had acquired Outerbase Inc., a startup focused on improving the developer experience for working with databases. The acquisition was pitched as supporting Cloudflare's aim to simplify backend development across its Workers ecosystem and expand its full-stack capabilities. April also saw the company unveil Workers VPC and VPC Private Link, major additions to its developer platform. The features enable secure, private connectivity between Cloudflare Workers and other cloud environments or on-premise infrastructure. Cloudflare also introduced its Remote MCP Server to support scalable artificial intelligence agent development at the edge. While announced just after the end of the quarter, on July 1, Cloudflare also launched an initiative to reshape how AI web crawlers interact with websites. The company introduced a pay-per-crawl model for AI bots, allowing content creators to monetize or block unauthorized scraping. "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," said Matthew Prince, co-founder and chief executive officer of Cloudflare in the company's earnings release. "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." For its fiscal third quarter, Cloudflare expects adjusted earnings per share of 23 cents on revenue of $543.5 million to $544.5 million. Both figures were ahead of the 21 cents per share and revenue of $538.6 million expected by analysts. For the full year, the company expects adjusted earnings per share of 85 cents to 86 cents on revenue of $2.1135 billion to $2.1155 billion. The revenue outlook was ahead of an expected $2.1 billion.

Cloudflare Earnings: Big Deals and AI | The Motley Fool

Cloudflare (NET 3.62%) grew revenue by 28% in the second quarter, easily beating analyst expectations. The cloud computing company ended the quarter with 3,712 large customers spending at least $100,000 annually, up 22% year over year. Those larger customers accounted for 71% of total revenue. One driver of Cloudflare's revenue growth was a bump in the dollar-based net retention rate, which measures how quickly existing customers are expanding spending. This rate rose to 114% in the second quarter, up from 112% during the same period last year. While that's a small increase, it's a sign that customers are increasing their investments in Cloudflare's growing portfolio of products and services. "Demand remains strong, as our largest customers grow their investments with Cloudflare at the highest levels we've seen since 2022," said CEO Matthew Prince in the earnings release. Cloudflare beat analyst expectations for adjusted earnings per share as well, although that metric only grew by 5% year over year. The company's GAAP net loss more than tripled to $50.4 million as operating costs soared. Free cash flow dipped to $33.3 million, down 13% year over year, as the company ramped up its capital expenditures. For the third quarter, Cloudflare expects revenue to grow by 26% to 27% and adjusted EPS to come in at $0.23. The company expects to spend between 12% and 13% of revenue on capital assets related to its edge computing network for the full year. Shares of Cloudflare surged 6% in after-hours trading after the company handily beat analyst estimates across the board. Guidance calling for similar levels of revenue growth in the third quarter and for the full year likely helped the cause, as did a rising net retention rate. Cloudflare stock was up 93% year to date going into the second-quarter report. One initiative that could prove significant for Cloudflare in the long run is the company's effort to enable customers to charge AI crawlers for access to their content. "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," said Prince. Beyond helping customers get a handle on AI crawler traffic, Cloudflare is pushing its platform as the ideal choice for building AI agents. Having an enormous presence already, with more than 20% of websites sitting behind the company's platform, Cloudflare may have an edge over the competition. While Cloudflare didn't say what was driving customer expansion in the second quarter, AI was likely part of the equation.