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Cloudflare (NET)
NYSE:NET
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Cloudflare
(NYSE:NET)67Neutral
Positive Factors
Customer Growth
The number of customers with annual spend over $1M increased 47% year-over-year to a record 173, with the pace of large customer adoption accelerating.
Financial Performance
Cloudflare reported an impressive quarter, where the volume and caliber of customers was striking - presenting investors with additional data that the go-to-market turnaround is taking hold.
Negative Factors
Valuation Concerns
NET also carries a particularly high valuation, and there is a preference for a few other high-growth software names at this time.
Cloudflare (NET) vs. S&P 500 (SPY)
Market Cap
$48.63B
Dividend YieldN/A
Average Volume (3M)4.47M
Price to Earnings (P/E)―
Beta (1Y)2.23
Revenue Growth28.76%
EPS Growth58.13%
CountryUS
Employees3,682
SectorTechnology
Sector Strength48
IndustrySoftware
Share Statistics
EPS (TTM)-0.23
Shares Outstanding308,320,920
10 Day Avg. Volume4,051,236
30 Day Avg. Volume4,465,106
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)26.02
Price to Cash Flow (P/CF)85.30
P/FCF Ratio227.50
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$161.41Price Target Upside12.29% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering25
Cloudflare Business Overview & Revenue Model
Company DescriptionFounded in 2009 and headquartered in California, Cloudflare, Inc. is a web infrastructure and website security company. The company operates a cloud platform and provides an integrated cloud-based security solution to secure a range of combination of platforms, including public cloud, private cloud, on-premise, software-as-a-service applications, and Internet of Things (IoT) devices.
How the Company Makes MoneyCloudflare makes money primarily through a subscription-based revenue model, offering a variety of tiered service plans. These plans range from free basic services to premium packages for enterprise clients, which include advanced security features, enhanced performance optimizations, and dedicated support. Revenue is generated through recurring fees charged for these service subscriptions. Additionally, Cloudflare monetizes by providing pay-as-you-go services for specific features and usage-based billing for certain products, such as its serverless computing platform, Workers. Partnerships with major technology companies and integrations with platforms like Amazon Web Services, Microsoft Azure, and Google Cloud also help Cloudflare expand its reach and customer base, contributing to its overall earnings.
Cloudflare Financial Statement Overview
Summary
Cloudflare demonstrates strong revenue and cash flow growth, but faces challenges with net losses and a concerning balance sheet due to negative total assets. Their cash-generating capabilities show promise, yet profitability and financial stability need improvement.Income Statement
Cloudflare has demonstrated solid revenue growth with a revenue increase from $1.30 billion in 2023 to $1.67 billion in 2024, representing a 28.8% growth rate. The gross profit margin remains strong at 77.3% in 2024. However, the company continues to report net losses, with a net profit margin of -4.7% in 2024, indicating ongoing profitability challenges.65
Positive
Balance Sheet
The company's balance sheet reveals a negative equity, with total assets at -$256.2 million and stockholders' equity at $19.8 million in 2024, indicating a potentially concerning financial position. The debt-to-equity ratio is unfavorable due to the negative equity, suggesting high leverage. Despite a significant cash position, the negative total assets require attention.40
Negative
Cash Flow
Operating cash flow improved significantly to $380.4 million in 2024, and free cash flow also increased to $195.4 million, reflecting robust cash-generating capabilities. The free cash flow growth rate is substantial at 63.5% year-over-year, indicating strong cash flow management despite net losses.72
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 1.67B | 1.30B | 975.24M | 656.43M | 431.06M | Gross Profit |
| 1.29B | 989.74M | 742.63M | 509.29M | 330.00M | EBIT |
| -154.76M | -185.49M | -201.20M | -127.68M | -106.77M | EBITDA |
| 62.05M | -36.17M | -92.13M | -127.68M | -50.62M | Net Income Common Stockholders |
| -78.80M | -183.95M | -193.38M | -260.31M | -119.37M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 1.86B | 1.67B | 1.65B | 1.82B | 1.03B | Total Assets |
| 3.30B | 2.76B | 2.59B | 2.37B | 1.38B | Total Debt |
| 1.46B | 1.44B | 1.58B | 1.29B | 428.30M | Net Debt |
| 1.32B | 1.35B | 1.37B | 979.43M | 319.41M | Total Liabilities |
| 2.25B | 2.00B | 1.96B | 1.56B | 563.71M | Stockholders Equity |
| 19.80M | 763.05M | 623.96M | 815.80M | 816.94M |
| Cash Flow | Free Cash Flow | |||
| 195.39M | 119.46M | -39.77M | -43.09M | -92.09M | Operating Cash Flow |
| 380.43M | 254.41M | 123.59M | 64.65M | -17.13M | Investing Cash Flow |
| -330.22M | -186.20M | -235.70M | -709.32M | -515.27M | Financing Cash Flow |
| 12.79M | -192.19M | 6.35M | 847.49M | 504.91M |
Cloudflare Technical Analysis
Positive
143.75
Price Trends
133.81
Positive
115.75
Positive
97.21
Positive
Market Momentum
1.61
Positive
48.34
Neutral
30.65
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NET, the sentiment is Positive. The current price of 143.75 is below the 20-day moving average (MA) of 155.27, above the 50-day MA of 133.81, and above the 200-day MA of 97.21, indicating a neutral trend. The MACD of 1.61 indicates Positive momentum. The RSI at 48.34 is Neutral, neither overbought nor oversold. The STOCH value of 30.65 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for NET.
Cloudflare Risk Analysis
Cloudflare disclosed 79 risk factors in its most recent earnings report. Cloudflare reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Cloudflare Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $29.74B | ― | -3.24% | ― | 30.77% | 79.05% | |
77 Outperform | $96.10B | 721.64 | -0.69% | ― | 31.35% | ― | |
67 Neutral | $48.63B | ― | -8.71% | ― | 28.76% | 58.13% | |
67 Neutral | $12.35B | 25.38 | 10.66% | ― | 4.70% | -7.33% | |
66 Neutral | $39.58B | 224.13 | 7.75% | ― | 26.12% | 274.50% | |
59 Neutral | $22.39B | 11.53 | -18.05% | 2.31% | 5.00% | -25.89% | |
48 Neutral | $939.18M | ― | -16.25% | ― | 7.45% | -10.76% |
* Technology Sector Average
Performance Comparison
NET
Cloudflare
143.75
46.26
47.45%
AKAM
Akamai
82.82
-27.34
-24.82%
ZS
Zscaler
196.45
-5.97
-2.95%
FSLY
Fastly
6.99
-6.22
-47.09%
CRWD
CrowdStrike Holdings
365.44
35.87
10.88%
DDOG
Datadog
115.09
-9.50
-7.63%
Cloudflare Earnings Call Summary
Earnings Call Date: Feb 6, 2025 | % Change Since: 1.58% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Positive
The earnings call reflected a strong performance with significant revenue growth, record customer additions, and improved operating margins. However, there were some concerns regarding increased churn and gross margin decreases, as well as anticipated higher network CapEx. Overall, the positive aspects, particularly in revenue growth, customer expansion, and sales productivity, were more pronounced than the challenges.Highlights
Strong Revenue Growth
Cloudflare, Inc. achieved revenue of $459.9 million for Q4 2024, representing a 27% year-over-year increase.
Record Addition of Large Customers
The company added a record number of new large customers, increasing to 3,497, which is up 27% year over year.
Operating Profit and Margin Improvement
Operating profit was $67.2 million, a 69% increase year over year, with an operating margin of 14.6%.
High Sales Productivity
The sales team achieved a fifth consecutive quarter of double-digit year-over-year increases in sales productivity.
Expansion in AI and Security
The company reported significant progress in AI and security, citing large contracts with major companies and strategic partnerships.
Successful Go-to-Market Strategy
The company highlighted an effective go-to-market execution, with a focus on enterprise account executives, leading to strong sales performance.
Lowlights
Gross Margin Decrease
Gross margin decreased 120 basis points sequentially and 130 basis points year over year to 77.6%.
Increased Churn Impact
There was mention of continued near-term headwinds from increased churn, impacting revenue recognition.
Network CapEx Increase
Network CapEx is expected to increase to 12% to 13% of revenue for full year 2025, up from 10% in 2024, due to investments in AI inference capacity.
Company Guidance
During the Cloudflare Q4 2024 earnings call, the company reported strong financial performance with revenue reaching $459.9 million, a 27% increase year-over-year. The company added 3,497 large customers, also marking a 27% annual increase, with these customers contributing 69% of the total revenue. Cloudflare's dollar-based net retention rate ticked up to 111%, while the gross margin was 77.6%. Operating profit stood at $67.2 million, reflecting an operating margin of 14.6%. The company also generated $47.8 million in free cash flow for the quarter. Looking forward, Cloudflare anticipates Q1 2025 revenue between $468 million and $469 million and full-year 2025 revenue in the range of $2.09 billion to $2.094 billion, representing a 25% increase year-over-year. The management highlighted continued investments in AI and go-to-market strategies as key drivers for future growth.Cloudflare Corporate Events
Business Operations and StrategyFinancial Disclosures
Cloudflare Reports Strong Revenue Growth in Q4 2024
Positive
Feb 6, 2025
On February 6, 2025, Cloudflare announced its financial results for the fourth quarter and fiscal year 2024, revealing significant growth in revenue and customer base. The company reported a 27% increase in fourth-quarter revenue to $459.9 million and a 29% increase in fiscal year revenue to $1,669.6 million. Despite a GAAP loss from operations, Cloudflare achieved a non-GAAP income from operations of $67.2 million in the fourth quarter. Notably, the number of customers spending over $1 million annually grew by 47%, indicating strong market traction and positioning Cloudflare for continued growth in 2025.
Executive/Board Changes
Cloudflare Appoints Michelle Zatlyn as Co-Chair
Neutral
Feb 6, 2025
On February 5, 2025, Cloudflare’s Board of Directors appointed Michelle Zatlyn as Co-Chair of the Board, recognizing her significant contributions to the company’s growth. Despite this new role, Zatlyn will maintain her responsibilities as President while no longer being titled Chief Operating Officer, sharing board leadership with CEO Matthew Prince.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.