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Cloudflare (NET)
NYSE:NET
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Cloudflare (NET) AI Stock Analysis

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NET

Cloudflare

(NYSE:NET)

Rating:70Neutral
Price Target:
$222.00
▲(6.71% Upside)
Cloudflare's strong revenue growth and strategic customer expansion are the most significant factors driving the score. The company's operational improvements and strategic wins in key sectors bolster its growth outlook. However, profitability challenges and valuation concerns due to negative earnings and lack of dividends weigh on the overall score.
Positive Factors
Customer Growth
Large customers are driving growth, with revenue from customers spending over $100k annually growing 35% year over year, increasing from 67% of total revenue last year to 71% in the quarter.
Financial Performance
Cloudflare's Q2 total revenue growth of 27.8% surpassed street consensus and demonstrated the highest magnitude of beat versus guidance since Q4:23.
Product Development
Cloudflare has introduced new use-case bundles to streamline consumption of its rapidly expanding portfolio, aligning its enterprise aspirations closer to its peers.
Negative Factors
Operational Challenges
Cloudflare acknowledged seeing 'disjointedness' with a mix of pockets of strength and areas that are struggling.
Valuation Concerns
Despite the respect for Cloudflare's technology vision, the very elevated valuation keeps analysts cautious.

Cloudflare (NET) vs. SPDR S&P 500 ETF (SPY)

Cloudflare Business Overview & Revenue Model

Company DescriptionCloudflare, Inc. is a leading provider of web infrastructure and website security services. Founded in 2009, the company operates in the technology sector, focusing on enhancing the performance and security of websites, applications, and APIs. Cloudflare offers a suite of products including content delivery network (CDN) services, DDoS mitigation, internet security, and domain registration, aiming to improve user experience and protect against cyber threats for businesses of all sizes.
How the Company Makes MoneyCloudflare generates revenue primarily through a subscription-based model, offering various tiers of services that cater to different customer needs. Their key revenue streams include monthly or annual fees from customers subscribing to their CDN and security services, which vary based on usage levels and features. Additionally, Cloudflare provides enterprise solutions with customized pricing for larger clients, contributing significantly to their earnings. The company also benefits from partnerships with other technology firms and service providers, enhancing their market reach and customer base. Furthermore, by expanding their product offerings and entering new markets, Cloudflare continues to drive growth in its revenue streams.

Cloudflare Key Performance Indicators (KPIs)

Any
Any
Customers
Customers
Shows the total number of clients using Cloudflare's services, indicating market reach and adoption of its solutions.
Chart InsightsCloudflare's customer base has shown robust growth, with a notable acceleration in recent quarters. This aligns with their strategic focus on expanding in AI and financial services, as highlighted in the latest earnings call. The increase in large customers and improved sales productivity are driving this expansion. Despite some pressure on gross margins and free cash flow, the overall positive momentum in customer acquisition and strategic wins suggests a strong trajectory for future growth.
Data provided by:Main Street Data

Cloudflare Earnings Call Summary

Earnings Call Date:Jul 31, 2025
(Q2-2025)
|
% Change Since: |
Next Earnings Date:Oct 30, 2025
Earnings Call Sentiment Positive
Cloudflare demonstrated strong revenue growth and customer expansion, driven by successful product innovation and strategic partnerships. However, challenges in gross margin and free cash flow were noted. The company shows confidence in continued growth despite economic uncertainties.
Q2-2025 Updates
Positive Updates
Record Revenue Achievement
Cloudflare achieved $512.3 million in revenue for Q2 2025, marking a 28% year-over-year growth and crossing the $2 billion annual run rate revenue milestone.
Strong Growth in Large Customers
The number of customers paying more than $100,000 annually increased by 22% year-over-year, with revenue from these large customers growing 35% and contributing to 71% of total revenue.
Innovation and Product Expansion
Cloudflare secured several significant contracts, including a $15 million contract with a rapidly growing AI company and multiple deals with Fortune 500 companies, demonstrating the scalability and efficiency of their platform.
Improved Sales Productivity
Sales productivity improved year-over-year and quarter-over-quarter, with new pipeline attainment growing at the fastest rate in over two years.
Strategic Partnerships and Market Positioning
Cloudflare formed strategic partnerships with media companies to invent new business models for content creators on an AI-driven web.
Negative Updates
Gross Margin Decline
Gross margin decreased by 80 basis points sequentially and 270 basis points year-over-year, attributed to increased paid versus free customer traffic and allocation of expenses.
Free Cash Flow Decrease
Free cash flow was $33.3 million, representing 6% of revenue, compared to $38.3 million or 10% of revenue in the same period last year.
Market and Economic Uncertainty
The company observed a mixed economic environment with both strong and struggling areas, potentially affecting future performance.
Company Guidance
During Cloudflare's second-quarter 2025 earnings call, the company reported significant achievements, including surpassing $2 billion in annual run rate revenue, with $512.3 million in quarterly revenue, marking a 28% year-over-year increase. Cloudflare's customer base expanded, with 3,712 customers now paying over $100,000 annually, a 22% increase from the previous year. Large customers contributed 71% of revenue, growing their contribution by 35% year-over-year. The dollar-based net retention rate rose to 114%, up 3% quarter-over-quarter, while the gross margin was maintained at 76.3%, within the company’s long-term target range. The company reported an operating profit of $72.3 million, with an operating margin of 14.1%, and generated $33.3 million in free cash flow. Cloudflare highlighted record ACV bookings and strategic wins across various sectors, including AI and financial services, indicating robust operational and strategic progress. The company also provided guidance for the third quarter, forecasting revenue between $543.5 million to $544.5 million, with a full-year revenue projection of $2.113.5 billion to $2.115.5 billion, representing a 27% year-over-year increase.

Cloudflare Financial Statement Overview

Summary
Cloudflare shows strong revenue growth and improving operational efficiency, despite challenges with profitability and leverage. Cash reserves are solid, supporting future initiatives.
Income Statement
75
Positive
Cloudflare has demonstrated strong revenue growth with a TTM revenue of $1.88 billion, up from $1.67 billion in 2024 and $1.30 billion in 2023. Gross Profit Margin remains high at approximately 76%, indicating effective cost management. However, the company is still facing profitability challenges with a negative Net Income and EBIT, highlighting ongoing operational expenses and investments in growth. Despite these, the EBITDA margin has shown improvement, suggesting better operational efficiency.
Balance Sheet
70
Positive
The balance sheet shows a strong cash position with $3.96 billion in cash and short-term investments. The Debt-to-Equity ratio is relatively high, indicating significant leverage, but the substantial equity of $1.24 billion supports financial stability. Return on Equity remains negative due to net losses, but the company maintains a healthy Equity Ratio of approximately 22%, indicating a stable asset base.
Cash Flow
80
Positive
Cloudflare's cash flow statement reflects robust operating cash flow generation at $477 million, with Free Cash Flow growing to $246 million, a significant increase from previous years. This improvement in cash flow metrics signals effective cash management strategies, which are critical for sustaining growth and reducing reliance on external financing. The Operating Cash Flow to Net Income ratio is positive, indicating efficient conversion of revenue into cash.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue1.88B1.67B1.30B975.24M656.43M431.06M
Gross Profit1.43B1.29B989.74M742.63M509.29M330.00M
EBITDA136.91M65.87M-42.62M-92.13M-125.17M-43.69M
Net Income-117.08M-78.80M-183.95M-193.38M-260.31M-119.37M
Balance Sheet
Total Assets5.56B3.30B2.76B2.59B2.37B1.38B
Cash, Cash Equivalents and Short-Term Investments3.96B1.86B1.67B1.65B1.82B1.03B
Total Debt3.46B1.46B1.44B1.58B1.29B428.30M
Total Liabilities4.32B2.25B2.00B1.96B1.56B563.71M
Stockholders Equity1.24B1.05B763.05M623.96M815.80M816.94M
Cash Flow
Free Cash Flow179.18M195.39M119.46M-39.77M-43.09M-92.09M
Operating Cash Flow477.62M380.43M254.41M123.59M64.65M-17.13M
Investing Cash Flow-1.13B-330.22M-186.20M-235.70M-709.32M-515.27M
Financing Cash Flow2.02B12.79M-192.19M6.35M847.49M504.91M

Cloudflare Technical Analysis

Technical Analysis Sentiment
Positive
Last Price208.05
Price Trends
50DMA
196.52
Positive
100DMA
170.50
Positive
200DMA
146.22
Positive
Market Momentum
MACD
2.87
Negative
RSI
58.10
Neutral
STOCH
82.04
Negative
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 208.05 is above the 20-day moving average (MA) of 202.42, above the 50-day MA of 196.52, and above the 200-day MA of 146.22, indicating a bullish trend. The MACD of 2.87 indicates Negative momentum. The RSI at 58.10 is Neutral, neither overbought nor oversold. The STOCH value of 82.04 is Negative, 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 (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
80
Outperform
$127.17B119.0717.45%14.87%-57.43%
73
Outperform
$43.14B-2.70%23.31%31.04%
70
Neutral
$72.73B-11.04%27.32%-11.94%
67
Neutral
$25.54B32.61-72.04%0.56%4.59%0.26%
67
Neutral
$60.36B31.44165.17%14.46%48.06%
65
Neutral
$106.33B721.64-8.99%23.46%-270.07%
61
Neutral
$35.45B8.20-10.60%1.91%8.56%-9.51%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
NET
Cloudflare
208.05
130.02
166.63%
FTNT
Fortinet
76.92
0.05
0.07%
PANW
Palo Alto Networks
190.52
17.44
10.08%
VRSN
Verisign
273.20
89.34
48.59%
ZS
Zscaler
274.57
117.44
74.74%
CRWD
CrowdStrike Holdings
413.50
154.18
59.46%

Cloudflare Corporate Events

Business Operations and StrategyFinancial Disclosures
Cloudflare Reports Q2 2025 Revenue Growth of 28%
Positive
Jul 31, 2025

On July 31, 2025, Cloudflare announced its financial results for the second quarter of fiscal 2025, reporting a 28% year-over-year revenue increase to $512.3 million. Despite a GAAP loss from operations, the company achieved non-GAAP income from operations of $72.3 million. Cloudflare’s strategic focus on innovation and expanding customer investments has positioned it well for future growth, as highlighted by CEO Matthew Prince. The company expects continued revenue growth in the third quarter and full fiscal year 2025, with projections of up to $544.5 million and $2.115 billion, respectively.

Private Placements and FinancingBusiness Operations and Strategy
Cloudflare Issues $2 Billion Convertible Notes
Neutral
Jun 17, 2025

On June 17, 2025, Cloudflare, Inc. issued $2.0 billion in 0% Convertible Senior Notes due 2030, with a conversion rate initially set at 4.0376 shares of Class A common stock per $1,000 principal amount. The notes, which mature on June 15, 2030, are part of a strategic financial maneuver to bolster Cloudflare’s capital for general corporate purposes, including potential acquisitions. The company also entered into capped call transactions to mitigate potential stock dilution, showcasing a proactive approach to managing its financial obligations and market positioning.

Executive/Board ChangesShareholder MeetingsFinancial Disclosures
Cloudflare Holds 2025 Annual Stockholders Meeting
Neutral
Jun 9, 2025

On June 5, 2025, Cloudflare, Inc. held its 2025 Annual Meeting of Stockholders, where significant decisions were made regarding the company’s governance and financial oversight. The election of Class III directors, the ratification of KPMG LLP as the independent registered public accounting firm, and the approval of executive compensation were key outcomes, reflecting shareholder support for the company’s strategic direction and management.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

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.Date of analysis: Aug 19, 2025