Cloudflare, Inc.
Cloudflare, Inc. provides a global cloud platform that secures and accelerates internet traffic for businesses. Its services include website protection, fast co
Cloudflare, Inc. provides a global cloud platform that secures and accelerates internet traffic for businesses. Its services include website protection, fast content delivery, and developer tools for AI applications. With nonhuman AI agent traffic now dominating the internet, Cloudflare is central to this shift, developing new monetization models. Large enterprise clients, including 80% of leading AI companies, generate 73% of its revenue.
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Source Network CapEx represented 7% of revenue in the second quarter, expected to be 14-15% for full year 2026. Management discusses maximizing utilization of CPU, memory, storage, and inference (GPUs) in their 'boxes'.
Confidence: high
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Source Explicitly mentioned that 'somebody has to pay for the bandwidth'. Network costs are a significant component of cost of revenue.
Confidence: high
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Source Implied by operating a global network of servers in over 330 cities, requiring substantial power.
Confidence: high
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Source Cloudflare operates a massive global network of servers across many cities, necessitating physical data center space.
Confidence: medium
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Source Matthew Prince mentions 'somebody has to pay for the people doing the work to create the content' and manage the network.
Confidence: medium
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Cadence monthly
Why it matters Directly reflects business investment in software and AI solutions, indicating enterprise adoption and willingness to spend on Cloudflare's offerings.
Signal to watch Bullish if investment in software continues to grow or accelerate, indicating strong enterprise IT budgets and digital transformation efforts.
Confidence: low
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Metric/field A191RL1Q225SBEA
Cadence monthly
Why it matters As 51% of Cloudflare's revenue is from the U.S., the overall health and growth of the domestic economy directly impacts enterprise spending on IT infrastructure and services.
Signal to watch Bullish if U.S. GDP growth remains strong or accelerates, signaling a robust economic environment for enterprise investment.
Confidence: high
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Metric/field World Composite PMI
Cadence monthly
Why it matters Reflects global business activity and sentiment across both manufacturing and services sectors, impacting Cloudflare's international revenue (EMEA 27%, APAC 14%) and overall enterprise confidence.
Signal to watch Bullish if the global composite PMI remains above 50 and shows an upward trend, indicating expanding business activity and potential for increased IT spending.
Confidence: high
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Metric/field PCU541541
Cadence monthly
Why it matters Tracks the average change over time in the selling prices received by domestic producers for computer systems design and related services, indicating pricing power or cost pressures within Cloudflare's market.
Signal to watch Bullish if the PPI for computer systems design and related services shows stability or an upward trend, suggesting a healthy pricing environment for IT services.
Confidence: high
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Metric/field FEDFUNDS
Cadence monthly
Why it matters Monetary policy, particularly interest rates, influences borrowing costs and overall economic investment, which can impact enterprise IT budgets and the willingness to fund new digital transformation projects.
Signal to watch Bullish if interest rates stabilize or show signs of easing, potentially leading to more favorable conditions for enterprise investment and growth.
Confidence: high
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Metric/field "Cloudflare Workers" search interest index (Worldwide)
Cadence daily
Why it matters Directly reflects developer and business interest in Cloudflare's key developer platform, which is a significant driver of new customer adoption and revenue growth, especially for AI workloads.
Signal to watch Bullish if search interest for 'Cloudflare Workers' shows sustained growth or acceleration, indicating increasing developer mindshare and adoption.
Confidence: high
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Metric/field Stars, Commits, Contributors
Cadence daily
Why it matters Indicates active developer engagement and community adoption of the Workers platform, which is crucial for Cloudflare's 'agentic Internet' strategy and developer-led growth.
Signal to watch Bullish if there is a consistent increase in stars, commits, and unique contributors, signaling a vibrant and growing developer ecosystem.
Confidence: high
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Metric/field Award Amount, Number of Awards
Cadence daily
Why it matters Cloudflare has reported significant wins with U.S. federal agencies. Tracking government contracts provides insight into public sector adoption and expansion.
Signal to watch Bullish if Cloudflare secures new or expanded federal contracts, particularly for its SASE, Zero Trust, or developer platform offerings.
Confidence: high
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Metric/field Number of AI/Developer Job Postings
Cadence weekly
Why it matters Reflects Cloudflare's internal investment and strategic focus on key growth areas like AI and its developer platform, indicating where the company is allocating resources.
Signal to watch Bullish if there is a sustained increase in job postings for AI-related roles (e.g., AI Engineer, Machine Learning) and developer-focused positions, indicating aggressive expansion in these areas.
Confidence: medium
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Metric/field Filing Date, Description of Event
Cadence event_driven
Why it matters 8-K filings disclose material events, which can include significant customer wins, partnerships, or strategic developments that impact Cloudflare's business and market position.
Signal to watch Bullish if filings announce major customer contracts, strategic partnerships related to AI or the agentic Internet, or other positive business developments.
Confidence: high
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Metric/field Cloudflare.com Unique Visitors (Global), Cloudflare.com Engagement Rate (Global)
Cadence monthly
Why it matters Provides insights into overall interest in Cloudflare's services and brand, as well as potential customer acquisition trends.
Signal to watch Bullish if Cloudflare.com shows consistent growth in unique visitors and engagement, indicating increasing brand awareness and potential customer interest.
Confidence: high
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Metric/field Cloudflare Contract Value (Enterprise), Cloudflare Renewal Rates (Enterprise)
Cadence monthly
Why it matters Offers granular data on enterprise spending with Cloudflare, including contract values and renewal trends, which are critical for assessing the success of its enterprise sales motion and dollar-based net retention.
Signal to watch Bullish if enterprise contract values and renewal rates for Cloudflare show an upward trend, validating its enterprise pivot and customer stickiness.
Confidence: high
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Metric/field Cloudflare WARP Daily Active Users (DAU), Cloudflare 1.1.1.1 Daily Active Users (DAU)
Cadence daily
Why it matters While primarily enterprise-focused, Cloudflare offers consumer-facing apps. Growth in DAU for these apps can indicate broader brand reach and user trust, which can indirectly support enterprise adoption.
Signal to watch Bullish if DAU for Cloudflare's consumer apps shows consistent growth, suggesting strong user adoption and brand recognition.
Confidence: high
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Metric/field Cloudflare SASE Market Share (Revenue), Cloudflare Security Market Share (Revenue)
Cadence quarterly
Why it matters Provides independent market share data for Cloudflare's key growth areas (SASE, Network Security), allowing for competitive benchmarking and validation of its market penetration.
Signal to watch Bullish if Cloudflare's market share in SASE and broader security segments shows an increasing trend, indicating successful displacement of competitors.
Confidence: high
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Metric/field Cloudflare Workers AI Inference Cost/Performance (per model)
Cadence monthly
Why it matters Cloudflare emphasizes its superior efficiency and cost-effectiveness for AI workloads. This data directly validates its competitive advantage in AI inference.
Signal to watch Bullish if Cloudflare Workers AI consistently ranks highly in terms of price-performance for AI inference, reinforcing its value proposition for AI companies.
Confidence: high
Cloudflare's exceptional Q2 2026 performance, marked by 36% revenue growth and record large customer additions, solidifies its enterprise momentum. Its pivotal
Cloudflare's exceptional Q2 2026 performance, marked by 36% revenue growth and record large customer additions, solidifies its enterprise momentum. Its pivotal role as the global control plane for the rapidly expanding agentic internet, fueled by exponential non-human AI traffic, creates a significant infrastructure multiplier. Despite ongoing gross margin pressures from AI investments, Cloudflare's superior GPU efficiency, strategic neutrality, and accelerating path to GAAP profitability position it as a premier play for AI-driven web replatforming and defining the internet's future business model. (October 25, 2026)
Cloudflare's enterprise transformation is delivering record results, evidenced by 36% year-over-year revenue growth and a record 986 net additions of large customers (>$100k ARR) in the past year, a 27% increase. Sales productivity has increased for the tenth consecutive quarter, and new customer bookings are growing at the fastest rate in over five years, indicating strong up-market momentum and execution.
The internet is fundamentally shifting to an "agentic" model, with non-human AI traffic surpassing human traffic in Q2 2026 and projected to be 1,000x human traffic in five years. Cloudflare is uniquely positioned at the center of this paradigm shift, building the foundational infrastructure, developer tools (Workers platform), and new monetization rails (Monetization Gateway, cloudflare.pay) for agent-driven commerce.
Cloudflare maintains a significant structural advantage in AI infrastructure by focusing on "work done" rather than renting idle hardware. Management claims their multi-tenant architecture allows them to extract 10x more efficiency per GPU than traditional hyperscalers. This efficiency, coupled with the rapidly growing Workers developer platform (7.4M developers, 2M added in Q2), enables Cloudflare to support massive AI workloads with disciplined CapEx and is pacing ahead of GAAP profitability targets.
Gross margins remain a concern, reported at 73.1% in Q2 2026, a 320 basis point decrease year-over-year, and still below management's long-term target range of 75-77%. This compression is driven by the aggressive build-out of AI infrastructure and a higher allocation of network expenses to cost of goods sold. Additionally, severance and restructuring charges were higher than anticipated.
While the "Agentic Web" vision and new monetization initiatives like cloudflare.pay are strategically compelling, their material revenue contribution remains largely unproven at scale. The shift towards a more diversified mix of pool of funds and consumption-based contracts, while driving growth, also makes quarter-to-quarter revenue forecasting more challenging and potentially volatile.
Cloudflare's deliberate strategy to avoid the AI CapEx "arms race" and not engage in selling commodity compute or renting servers, while efficient, could be a strategic risk. If the market's demand for raw GPU capacity outweighs the benefits of Cloudflare's optimized "work done" model, or if hyperscalers' integrated AI offerings prove more attractive, it could limit Cloudflare's market share in certain AI segments.
| Key Factor | Why It Matters | What To Watch | What It Signals | Where/How To Track | Free Alt Data | Paid Alt Data |
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| Workers Developer Platform Adoption & Revenue Contribution | The Workers platform is a key driver of new customer adoption, AI agent development, and 'pool of funds' contracts. Its continued rapid growth and increasing revenue contribution are essential for Cloudflare's long-term growth and its position in the 'agentic Internet'. | Number of developers on the platform, growth rate of paying customers using Workers, and specific mentions of Workers-driven 'pool of funds' contract values or consumption rates. Specifically, watch if developer additions maintain or exceed the Q2 2026 rate (nearly 2 million per quarter) and if Workers is explicitly cited as a significant driver of new bookings or accelerated 'pool of funds' consumption. | Bullish if developer additions maintain or exceed the Q2 2026 rate (nearly 2 million per quarter) and if Workers is explicitly cited as a significant driver of new bookings or accelerated 'pool of funds' consumption. Bearish if developer growth decelerates or Workers' revenue contribution is not highlighted as material. | Company earnings calls, investor presentations, and developer blog posts/announcements (next scheduled earnings call for Q3 2026). | 1. GitHub — Cloudflare Workers GitHub Stars/ForksNot in registry Metric/field Number of stars and forks for Cloudflare Workers-related repositories Cadence daily Why it matters Indicates developer community engagement and interest in the Workers platform. Signal to watch Consistent increase in stars and forks. Confidence: Medium | 1. Appfigures — Developer Tool App DownloadsNot in registry Metric/field Downloads and active users for Cloudflare's developer-focused mobile apps/tools (if applicable) Cadence monthly Why it matters Proxies developer adoption and engagement with Cloudflare's tools. Signal to watch Sustained growth in downloads and active users. Confidence: Low |
| Large Customer Cohort Growth (>$100K, >$1M, and >$5M ARR) | This reflects Cloudflare's success in its enterprise sales motion and its ability to land and expand with high-value customers, which is crucial for long-term revenue durability and market share gains against legacy security incumbents. | Net additions of customers spending >$100K, >$1M, and >$5M/year in subsequent quarters. The percentage of total revenue contributed by large customers (currently 73%). Specifically, watch for net additions of >$100K customers to maintain or exceed the Q2 2026 rate of 282 additions in the quarter and 986 year-over-year. | Bullish if net additions of $100K+, $1M+, and $5M+ customers continue to set new records or maintain strong growth (e.g., >27% year-over-year for >$100K customers), and if the revenue contribution from large customers increases. Bearish if net additions decline or revenue contribution stagnates. | Company earnings calls and supplemental financial information (next scheduled earnings call for Q3 2026). | 1. USASpending.gov — Federal Contract AwardsNot in registryaccess=api Metric/field Cloudflare (NET) federal contract awards >$100K Cadence daily/weekly Why it matters Indicates large government customer wins and expansions, a segment Cloudflare is actively targeting. Signal to watch New contracts or increased value in existing contracts. Confidence: Medium | 1. Gartner Peer Insights — Enterprise Software ReviewsMatchedgartner_it_spending_market_forecasts · access=file · map_only Metric/field Number of new reviews and average rating for Cloudflare's enterprise products (SASE, Zero Trust, Workers) from large enterprises Cadence monthly Why it matters Proxies enterprise customer satisfaction and adoption trends among large organizations. Signal to watch Increasing number of positive reviews from large enterprises. Confidence: Medium |
| Gross Margin Stabilization and Unit Economics Expansion | Gross margin pressure from AI investments has been a concern. Stabilization and expansion of total unit economics are critical for Cloudflare to demonstrate operating leverage and progress towards GAAP profitability, validating its efficient AI infrastructure strategy. | Non-GAAP Gross Margin percentage in Q3 and Q4 2026 earnings reports. Management commentary on 'total unit economics' and efficiency gains from multi-tenancy and GPU utilization. Specifically, watch for Gross Margin to remain stable or improve sequentially (e.g., >73.1%) in H2 2026. | Bullish if Gross Margin remains stable or improves sequentially in H2 2026 (e.g., >73.1%) and management confirms strong expansion in total unit economics. Bearish if Gross Margin declines or unit economics do not improve as expected. | Company earnings calls and supplemental financial information (next scheduled earnings call for Q3 2026). | [] | [] |
| Launch and Adoption of Agentic Internet Monetization (Monetization Gateway, Wallets, cloudflare.pay) | These new initiatives are foundational to Cloudflare's vision of defining the next business model of the Internet. Material adoption and revenue contribution would validate its strategic foresight and unlock significant new revenue streams beyond traditional services. | Specific announcements of customer adoption, transaction volumes, or initial revenue contributions from Monetization Gateway, Wallets, or cloudflare.pay in future earnings reports. Watch for the number of content creators or AI companies leveraging these tools. | Bullish if Cloudflare reports material revenue contribution (e.g., >$5M ACV) or significant customer wins tied directly to these agentic monetization services by Q4 2026 or Q1 2027. Bearish if there is no material update on adoption or revenue contribution from these initiatives in the next 2-3 quarters. | Company earnings calls, investor presentations, and product announcements (next scheduled earnings call for Q3 2026). | [] | [] |
| AI Agent Traffic Volume & Non-Human Traffic Dominance | This factor is central to Cloudflare's thesis of leading the 'agentic Internet' and creating new monetization models. Sustained growth in non-human traffic validates its strategic positioning and potential for future revenue streams. | Management's updated statistics on the percentage of non-human traffic, its growth rate, and any new projections for future traffic volume. Specifically, watch if non-human traffic continues to grow significantly faster than human traffic, maintaining or accelerating the '1,000x in 5 years' projection. | Bullish if non-human traffic continues to grow significantly faster than human traffic, maintaining or accelerating the '1,000x in 5 years' projection. Bearish if growth rates decelerate unexpectedly. | Company earnings calls and investor presentations (next scheduled earnings call for Q3 2026). | 1. Google Trends — Web Search InterestNot in registry Metric/field "AI agent traffic" search interest index (Worldwide) Cadence daily Why it matters Reflects broader industry and developer interest in AI agents, which drives Cloudflare's network traffic. Signal to watch Sustained or increasing trend in search interest. Confidence: Medium | 1. Similarweb — Website Traffic AnalyticsMatchedsimilarweb_website_traffic_engagement · access=file · map_only Metric/field Cloudflare (cloudflare.com) total visits from bots/non-human sources Cadence monthly Why it matters Directly measures the volume of non-human traffic flowing through Cloudflare's network, a key indicator of AI agent activity. Signal to watch Consistent month-over-month growth in non-human traffic. Confidence: High |
This metric is crucial for understanding Cloudflare's ability to drive increased spending from its existing customer base. It indicates the success of cross-sel
| Key reported metrics | ||
|---|---|---|
| Metric | Last period | Why it matters |
| Dollar-based Net Retention Rate | 120% | This metric is crucial for understanding Cloudflare's ability to drive increased spending from its existing customer base. It indicates the success of cross-selling new products, especially the Workers platform and AI-driven consumption models. |
| Large Customers (>$100,000 annually) Growth | 27% | This metric reflects Cloudflare's success in its enterprise sales motion and its ability to land and expand with high-value customers. It is critical for long-term revenue durability and market share gains against legacy security incumbents. |
| Total Revenue | $696.1 million (36% year-over-year growth) | Total Revenue growth is the most fundamental indicator of Cloudflare's overall market traction and its ability to monetize the expanding "Agentic Internet" and enterprise adoption. Investors will watch for sustained acceleration as a validation of its strategic positioning. |
Given Cloudflare's Q2 2026 revenue reacceleration to 36% and strong RPO growth, can the company sustain this momentum and exceed its updated Q3 and full-year 20
Given Cloudflare's Q2 2026 revenue reacceleration to 36% and strong RPO growth, can the company sustain this momentum and exceed its updated Q3 and full-year 2026 revenue guidance of 31-32% growth, validating its enterprise sales engine and the increasing impact of agentic AI workloads?
Can Cloudflare sustain the sequential improvement in gross margins and expand total unit economics in H2 2026 as guided, and will its strategy of maximizing GPU efficiency (claiming 10x utilization) without participating in the AI CapEx 'arms race' lead to sustained operating leverage and accelerate GAAP profitability further ahead of the 2028 target?
How quickly and at what scale will Cloudflare's newly launched 'Agentic Internet' monetization initiatives (Monetization Gateway, Wallets, cloudflare.pay) translate into material revenue contributions, validating its unique position to define the next internet business model and drive significant upside beyond core services?
| 3 Things Management Is Most Focused On | Call Takeaway & Tone | Prior Quarter'S Y/Y Growth By Segment | 3 Things Analysts Most Pressed On (And Mgmt Responses) | Revenue Segments |
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| 3 Things Management Is Most Focused On1. Leading the 'Agentic Internet' and defining its business model: Management is heavily focused on the paradigm shift to AI-driven, non-human traffic, positioning Cloudflare as the foundational infrastructure and developing new monetization models like cloudflare.pay. 2. Scaling the Workers developer platform: The company emphasizes the record growth in developers and the Workers platform's suitability for building agents and agentic workloads due to its efficiency and cost-effectiveness. 3. Disciplined execution, growth, and profitability: Management consistently highlights strong financial performance, including accelerating revenue, improving gross margins, and pacing ahead of GAAP profitability targets, while maintaining a focus on efficient growth. | Call Takeaway & ToneThe overall takeaway of the call was highly positive and strategically bullish. Cloudflare delivered an extremely strong second quarter, marked by accelerated revenue growth, record large customer additions, and significant momentum in its Workers developer platform. The company is confidently positioning itself at the forefront of the 'agentic Internet' paradigm shift, where AI agents drive exponential traffic growth, and is actively developing new business models to monetize this transformation. Management expressed strong excitement about Cloudflare's future and its unique position to define the next era of the Internet. | Prior Quarter'S Y/Y Growth By SegmentTotal Revenue (Q1 2026): 34% year-over-year; U.S. Revenue (Q1 2026): Not explicitly reported in available Q1 2026 summaries; EMEA Revenue (Q1 2026): Not explicitly reported in available Q1 2026 summaries; APAC Revenue (Q1 2026): 34% year-over-year; Large Customers (>$100,000 annually) (Q1 2026): 25% year-over-year. | 3 Things Analysts Most Pressed On (And Mgmt Responses)1. The changing profile of traffic (non-human/AI) and its monetization: Analysts inquired if this trend drives new logos or expands existing customer relationships, and if it impacts large or small customers. Management responded that non-human traffic is growing exponentially, leading to new monetization opportunities (e.g., cloudflare.pay) that will impact both new and existing customers, particularly large enterprises. 2. Stabilization of gross margins: Analysts asked about the factors influencing gross margins and their trajectory for the second half of the year. Management stated that gross margins are stabilizing around current levels, but the primary focus is on improving total unit economics across all products, which is expected to expand throughout the second half. 3. Cloudflare's strategy regarding the AI CapEx 'arms race': Analysts questioned why Cloudflare is not participating in the massive GPU infrastructure investments seen from hyperscalers. Management explained that they are not interested in selling commodity compute or allowing AI companies to use their balance sheet for generic servers. Instead, Cloudflare focuses on high-quality revenue by maximizing utilization (claiming 10x more efficiency per CapEx dollar) and selling 'work getting done' through its unique architecture. | Revenue SegmentsTotal Revenue: 36% year-over-year; U.S. Revenue: 41% year-over-year; EMEA Revenue: 30% year-over-year; APAC Revenue: 32% year-over-year; Large Customers (>$100,000 annually): 27% year-over-year. |
| 3 Things Management Is Most Focused On | Call Takeaway & Tone | Prior Quarter'S Y/Y Growth By Segment | 3 Things Analysts Most Pressed On (And Mgmt Responses) | Revenue Segments |
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| 3 Things Management Is Most Focused On1. Enterprise Sales Maturity: Management is emphasizing the successful transition to a 'true enterprise sales' engine, evidenced by record sales productivity, the highest quota attainment in four years, and closing their largest-ever ACV deal ($42.5M/year). 2. The Agentic Internet (Act 4): Positioning Cloudflare as the 'global control plane' for AI agents, noting that agent-driven traffic is doubling weekly and creating a massive multiplier for network usage. 3. Workers Developer Platform: Scaling the serverless platform as the foundation for 'vibe coding' and AI-assisted development, with over 4.5 million developers now active on the platform. | Call Takeaway & ToneTakeaway: Cloudflare has successfully reaccelerated its growth (from 31% to 34%) by pivoting from a product-led model to a high-end enterprise powerhouse. The company is uniquely positioned to capture the 'Agentic Web' shift, where AI agents drive an order of magnitude more traffic than humans. Tone: Extremely confident and bullish; CEO Matthew Prince stated he 'wouldn't trade places with any other CEO.' | Prior Quarter'S Y/Y Growth By SegmentTotal Revenue (Q3 2025): 31% y/y; U.S. Revenue: 31% y/y; EMEA Revenue: 26% y/y; APAC Revenue: 43% y/y; Large Customer Revenue: 42% y/y. (Note: Total, EMEA, and APAC growth accelerated significantly). | 3 Things Analysts Most Pressed On (And Mgmt Responses)1. AI Agent Disruption & CapEx: Analysts asked how Cloudflare avoids the massive GPU CapEx of hyperscalers; Mgmt responded that they focus on 'getting work done' efficiently through multi-tenancy, achieving up to 10x more work per GPU than hyperscalers. 2. Future Internet Business Models: Analysts questioned the 'AI Crawl Control' and 'Pay Per Crawl' initiatives; Mgmt explained they are acting as a 'neutral broker' to help publishers monetize content consumed by AI agents. 3. Channel Nimbleness: Analysts asked if a channel-first strategy slows them down; Mgmt argued that the channel actually increases nimbleness by providing massive leverage to their direct sales force. | Revenue SegmentsTotal Revenue: 34% y/y; U.S. Revenue: 31% y/y; EMEA Revenue: 31% y/y; APAC Revenue: 50% y/y; Large Customer Revenue (>$100k ARR): 42% y/y. |
| 3 Things Management Is Most Focused On | Call Takeaway & Tone | Prior Quarter'S Y/Y Growth By Segment | 3 Things Analysts Most Pressed On (And Mgmt Responses) | Revenue Segments |
|---|---|---|---|---|
| 3 Things Management Is Most Focused On1. Enterprise Sales Transformation: Transitioning from a product-led growth model to a sophisticated enterprise sales engine, focusing on sales productivity and larger ticket sizes. 2. AI and the Agentic Web: Positioning Cloudflare as the essential infrastructure for AI inference and 'agentic' commerce, including monetization via 'Pay Per Crawl.' 3. Platform Consolidation: Driving adoption across the '4 Acts' (Application Services, SASE, Developer/Workers, and AI) to displace legacy point solutions and hyperscale egress fees. | Call Takeaway & ToneTakeaway: Cloudflare is successfully reaccelerating its top-line growth (31%) by pivoting to a high-end enterprise sales model and capturing early AI inference workloads. The massive jump in RPO and large customer metrics suggests strong forward momentum in displacing legacy security and networking vendors. Tone: Highly confident and strategically aggressive. | Prior Quarter'S Y/Y Growth By SegmentTotal Revenue (Q2 2025): 30% y/y; U.S. Revenue: 21% y/y; EMEA Revenue: 28% y/y; APAC Revenue: 44% y/y. (Note: Total and U.S. growth accelerated, while EMEA and APAC saw slight y/y deceleration). | 3 Things Analysts Most Pressed On (And Mgmt Responses)1. RPO Acceleration: Analysts questioned the drivers behind the 43% RPO growth; Mgmt cited record additions in the $1M+ and $5M+ customer cohorts and increased consumption of 'pool of funds' contracts. 2. Executive Departure: Analysts asked about the impact of President of Product & Engineering CJ Desai leaving; Mgmt responded that the 'customer-obsessed' innovation DNA is firmly established and the leadership bench remains strong. 3. Sales Productivity: Analysts asked if productivity gains were reaching a ceiling; Mgmt emphasized that they are still seeing headroom for improvement as they hire higher-caliber talent and ramped rep capacity increases. | Revenue SegmentsTotal Revenue: 31% y/y; U.S. Revenue: 31% y/y; EMEA Revenue: 26% y/y; APAC Revenue: 43% y/y; Large Customer Revenue Contribution: 42% y/y. |
| About Expanding Eligible Market | About Competition | About The Broader Industry | Where Things Are Headed | Updates On Theme | Broader Themes Emerging | Bullish-Leaning Quotes (Short) | Bearish-Leaning Quotes (Short) | Hiring |
|---|---|---|---|---|---|---|---|---|
| About Expanding Eligible MarketCloudflare achieved record growth in large customers, adding 986 net additions year-over-year, the most in its history, across all tiers from $100,000 to over $5 million in annualized revenue. The company also added over 80,000 paying customers this quarter, a 74% year-over-year increase, and ended with more than 7.4 million developers on its platform, adding nearly 2 million in Q2 alone. Cloudflare is building foundational elements for agentic commerce, including Monetization Gateway, Wallets, and cloudflare.pay, to empower new business models and allow customers to sell any resource behind Cloudflare. The company open-sourced Cloudflare OS, which is seeing strong interest from large companies and systems integrators, expanding the opportunity for every employee in an organization to build tools securely. Cloudflare anticipates its partner-sourced revenue share to continue increasing, potentially reaching over 50% or even 60% over time. | About CompetitionCloudflare is successfully displacing incumbent hyperscalers by offering a zero egress model, superior performance, and a unified platform that eliminates fragmented legacy point solutions. For instance, one customer chose Cloudflare over an incumbent hyperscaler to avoid egress taxes and vendor lock-in for AI workloads. In a competitive evaluation, Cloudflare beat two first-generation Zero Trust vendors due to faster network performance and easier single-pane-of-glass management, allowing customers to operate with roughly one-third the staff. A large U.S. federal agency switched from a legacy provider after an outage, choosing Cloudflare for greater resilience and real-time control. Cloudflare's security-first DNA allows it to offer secure AI tools, leading a large government agency to cancel an RFP with a first-generation Zero Trust company to re-evaluate with an 'agents-first' approach. Matthew Prince emphasized that Cloudflare avoids the 'commodity compute' business of hyperscalers, focusing instead on 'work getting done' and achieving 10x more utilization per CapEx dollar compared to competitors. | About The Broader IndustryThe internet is undergoing a fundamental rewrite, with non-human traffic surpassing human traffic for the first time in Q2 2026, and projected to be 1,000x human traffic in five years. This shift is driven by AI agents and AI-answer engines, transforming the web from human-driven browsing to machine-to-machine traffic and agent-driven commerce. The business model of the internet, traditionally defined by advertising, is expected to change dramatically over the next 27 years. The number of developers is increasing massively, with non-technical individuals now writing code and creating tools using 'vibe coding platforms.' The industry is facing challenges in securely deploying AI tools across organizations. The demands of agents necessitate a new generation of cloud infrastructure, as even containers are becoming too heavy; Cloudflare's lightweight 'isolates' sandboxing technology is designed to meet this need for scale. | Where Things Are HeadedCloudflare is positioned to lead the next phase of the internet in the age of agentic AI, building the scalable infrastructure, developer tools, and payment rails for the agentic internet. The company is focused on defining the future business model of the internet, moving beyond advertising to a system where AI companies and content owners can thrive together through new monetization models like microtransactions. Cloudflare expects its gross margin to stabilize and unit economics to expand in the second half of 2026. The company is pacing ahead of its goal for GAAP profitability by the end of 2028. Workers products (Act 3) continue to be the fastest-growing, followed by SASE products (Act 2). Cloudflare anticipates its partner-sourced revenue to grow, potentially exceeding 50-60% over time. The company is developing a new, lighter-weight sandboxing technology called 'isolates' to meet the incredible increase in internet usage driven by agents. | Updates On ThemeDistribution | Broader Themes EmergingThe fundamental rewrite of the internet from human-driven browsing to AI-answer engines and agent-driven commerce, leading to a shift in the internet's business model from advertising to microtransactions and agent-friendly payments. The democratization of coding and development, where non-technical individuals are increasingly able to write and deploy code using 'vibe coding platforms.' The evolution of cloud pricing models from purely ratable SaaS to a more diversified mix of pool of funds and consumption-based structures. | Bullish-Leaning Quotes (Short)We had an extremely strong second quarter. Sales productivity increased year-over-year for the tenth consecutive quarter. New customer bookings increased at the fastest rate in more than 5 years. We added more than 80,000 paying customers this quarter, driving 74% year-over-year paying customer growth. The agentic future needs a new kind of cloud. This is the winning formula that we know works. Over 80% of the major AI companies are Cloudflare customers and rely on us. There's no company in a better position to define what it looks like than Cloudflare. We delivered a stellar second quarter with strength across all major metrics we track. Our dollar-based net retention rate accelerated to 120%. We are pacing ahead of GAAP profitability targets. The trajectory of the business is clearly up and to the right. I have never been more excited for the future of Cloudflare. The Worker products are still the fastest-growing acts we have. Our partner share of revenues will continue to tick up over time. | Bearish-Leaning Quotes (Short)Gross margin was 73.1%, a decrease of 320 basis points year-over-year. Paid versus free traffic on our network continued to grow year-over-year, driving additional allocation of network costs into cost of revenue. G&A as a percentage of revenue increased to 11% from 10%. Severance and other restructuring charges were higher than initially anticipated. How we move from quarter-to-quarter becomes a little bit more difficult to forecast. We don't think selling commodity compute is a particularly attractive business. Hyperscalers' GPU utilization is super low. Renting servers is a commodity business, not very attractive. | HiringOur total head count ended the quarter at 4,700. Excluded from these non-GAAP results were severance and other restructuring charges of $151 million for the second quarter, of which $99 million was paid in the second quarter. For full year 2026, we now expect severance and other restructuring charges of up to $165 million with up to $130 million expected to be cash related. While higher than initially anticipated, we prioritized speed of resolution, particularly internationally to ensure a continued focus on execution. |
| About Expanding Eligible Market | About Competition | About The Broader Industry | Where Things Are Headed | Updates On Theme | Broader Themes Emerging | Bullish-Leaning Quotes (Short) | Bearish-Leaning Quotes (Short) |
|---|---|---|---|---|---|---|---|
| About Expanding Eligible MarketCloudflare is aggressively pursuing 'Act 4,' focusing on the 'Agentic Internet' and inventing new business models for the web. This includes 'AI Crawl Control' to help publishers protect and monetize intellectual property against scrapers, and 'NET Dollar' for agent-to-agent commerce. They are also targeting the small business sector through partnerships with Shopify, Visa, and PayPal to integrate them into the agentic economy. The company signed its largest ACV deal ever at $42.5 million, signaling a deeper move into massive enterprise contracts. | About CompetitionManagement highlights winning against hyperscalers (AWS, Azure, GCP) due to 'strategic neutrality' and superior TCO, claiming they can wring '10x the amount of work' out of a GPU compared to providers who prefer renting idle machines. They are successfully displacing legacy Zero Trust and VPN incumbents (e.g., Zscaler, Akamai) by offering a more automated, unified platform. One government entity was reportedly 'shook' by the simplicity and power of Cloudflare's platform compared to first-generation incumbents. | About The Broader IndustryThe industry is undergoing a 'fundamental replatforming' from human-centric consumption (clicks and seats) to an 'agentic' model (digital workers). AI agents are described as an 'infrastructure multiplier,' generating an order of magnitude more outbound traffic than humans. 'Vibe coding' is emerging as a major trend, with most platforms built on Cloudflare Workers. There is a shift from seat-based licensing to a model defined by compute, connectivity, and 'rails and guardrails' for AI. | Where Things Are HeadedCloudflare aims to be the 'global control plane' for the agentic Internet. Strategically, the company is moving toward a business model where winners provide the compute and connectivity for digital workers at scale. The go-to-market strategy is shifting to 'channel-first' to scale enterprise sales, supported by a new published price list to simplify partner quoting. They are also focused on defining the future business model of the Internet as AI bots replace traditional ad-clicking humans. | Updates On ThemePhase | Broader Themes EmergingAgentic Commerce and the 'Agentic Internet'; Pay Per Crawl (IP monetization for publishers); Vibe Coding (AI-assisted development); Multi-cloud neutrality as a mission-critical requirement for AI companies. | Bullish-Leaning Quotes (Short)New ACV book grew nearly 50% year over year... the fastest growth rate since 2021.; We are effectively the global control plane for the agentic Internet.; 80% of the leading AI companies already rely on us.; Our go-to-market engine is firing on all cylinders.; We blew away our previous record for new ACV in the quarter. | Bearish-Leaning Quotes (Short)Gross margin was 74.9%, just below our long-term target range.; Highest allocation of network expenses to cost of goods sold... ever.; I don't know exactly what all those things are going to look like.; Relative revenue contribution across our four acts can impact near-term gross margin. |
| About Expanding Eligible Market | About Competition | About The Broader Industry | Where Things Are Headed | Updates On Theme | Broader Themes Emerging | Bullish-Leaning Quotes (Short) | Bearish-Leaning Quotes (Short) |
|---|---|---|---|---|---|---|---|
| About Expanding Eligible MarketCloudflare is expanding into 'Agentic Commerce' with the introduction of NET Dollar for agent-to-agent payments and 'Pay Per Crawl' to monetize AI scrapers. The company is also deepening its reach into the U.S. public sector with a complete FedRAMP portfolio and has entered a strategic partnership with Oracle to make Cloudflare natively available within OCI, targeting multi-cloud and hybrid workloads. | About CompetitionCloudflare is positioning itself against hyperscale public clouds by eliminating egress fees and offering superior TCO for AI inference. Management claims a significant architectural advantage in DDoS protection, stating they have 4x the capacity of all scrubbing center-based competitors combined. They are also actively displacing first-generation Zero Trust and legacy VPN providers through their unified SASE platform. | About The Broader IndustryThe industry is undergoing a massive platform shift from human-centric browsing to an 'Agentic Internet' where AI agents consume information and conduct commerce. There is a structural move toward multi-cloud environments, and quantum-safe cryptography is emerging as a critical requirement for long-term data security as organizations prepare for future decryption risks. | Where Things Are HeadedCloudflare expects to reach a $3 billion annualized revenue run rate by Q4 2026, on its way to a $5 billion goal by 2028. Strategically, the company is moving toward 70-80% utilization for GPUs, similar to its CPU efficiency, and is transitioning from a product-led growth model to a sophisticated enterprise sales organization with higher-caliber talent and larger deal sizes. | Updates On ThemePhase | Broader Themes EmergingAgentic Internet and Agent-to-Agent Commerce; Quantum-Safe Cryptography as a standard; Multi-cloud interoperability and the 'Babel fish' of AI protocols. | Bullish-Leaning Quotes (Short)"Revenue growth accelerated... to 31% year-over-year."; "Bookings from partner-initiated opportunities doubled year-over-year."; "80% of the leading AI companies already rely on us."; "Cloudflare won because our fundamental architecture advantage gives us literally 4x the capacity of all our scrubbing center-based competition combined." | Bearish-Leaning Quotes (Short)"One bit of disappointing news is that CJ Desai is going to be leaving Cloudflare."; "Gross margin... representing a decrease of 350 basis points year-over-year."; "I don't know what the future business model of the Internet will look like." |
| Date | Comment | Comment Type | Comment Sentiment | Link | Price Reaction |
|---|---|---|---|---|---|
| 2025-07-31 | Q2 beat with 28% y/y growth, strong large-customer and pool-of-funds momentum; new Act 4 vision boosts long-term potential, but monetization timing, margins, and macro uncertainties tempered investor reaction. | Earnings Transcript | Mixed | -3.65% (vs SPY: -3.51%) | |
| 2026-02-10 | Cloudflare's Q4 results showcased a powerful reacceleration, with revenue growing 34% and large-customer momentum ($1M+ cohorts up 55%) validating its enterprise pivot. Management's "Agentic Internet" vision and "Pay Per Crawl" monetization resonated strongly. Despite slight gross margin pressure from AI infrastructure spend, the market reacted bullishly (+8.8%), rewarding the 48% RPO growth and record new ACV, which signaled dominant positioning in the AI inference cycle. | Earnings Transcript | Bullish | https://www.cloudflare.com/investor-relations/ | +8.82% (vs SPY: +10.32%) |
| 2026-08-06 | Cloudflare reported a stellar Q2 2026, with revenue up 36% and record large customer additions, driven by its Workers platform and the "agentic Internet" shift. Profitability improved, and the company is ahead of its GAAP profit target. The market reacted positively, with the stock outperforming the SPY, validating Cloudflare's strong execution and strategic positioning in AI. | Earnings Transcript | Mixed | +5.57% (vs SPY: +4.99%) |
| Catalyst ID | Estimated Timing | Estimated Date Start | Estimated Date End | Catalyst | Why It Matters | Ticker Or Theme Specific | Transcript Date | Source Type |
|---|---|---|---|---|---|---|---|---|
| NET_b838626c | December 2, 2026 | 2026-12-02 | 2026-12-02 | Effective date for full compliance with transparency obligations under the EU AI Act for artificially generated content. | This regulatory action will drive demand for tools that ensure machine-readable marking and compliance for AI-generated content, impacting Cloudflare's generative AI offerings and those serving EU customers, potentially increasing adoption of its security and developer platforms. | Theme | 2026-08-06 | earnings_transcript |
Prior earnings scorecards
