Cloudflare Q2 Earnings and Revenues Beat Estimates, FY25 View Raised

Cloudflare, Inc. NET reported non-GAAP earnings of 21 cents per share for the second quarter of 2025, beating the Zacks Consensus Estimate by 16.7%. The bottom line increased 5% on a year-over-year basis.

Cloudflare’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and met in one, delivering an average surprise of 8.3%. 

Second-quarter revenues increased 28% year over year to $512.3 million, which surpassed the consensus mark by 2.3%. The year-over-year improvement in revenues can be attributed to the sustained momentum in the onboarding of large new enterprise customers, remarkable progress in the public sector, continued high prioritization of security by its customers, and a zero-trust approach.

Cloudflare, Inc. Price, Consensus and EPS Surprise

Cloudflare, Inc. price-consensus-eps-surprise-chart | Cloudflare, Inc. Quote

Cloudflare’s Q2 Details

Cloudflare’s top-line performance was positively impacted by its mix of customer segments (Channel Partners and Direct Customers). Revenues from Channel Partners (25.5% of total revenues) were $130.4 million, up 70% year over year. Second-quarter revenues from Direct Customers (74.5% of total revenues) were $381.9 million, up 17.8% year over year.

Cloudflare had 265,929 paying customers at the end of the second quarter, up 27% year over year. It added 185 new customers during the quarter who contributed more than $100,000 in annual revenues. The total count of such customers reached 3,712 at the end of the quarter.

Cloudflare’s second-quarter non-GAAP gross profit increased 23% year over year to $390.66 million. However, the non-GAAP gross margin contracted 270 basis points (bps) year over year to 76.3%.

Non-GAAP operating income for the quarter jumped to $72.31 million from $57 million in the year-ago quarter. The non-GAAP operating margin contracted 10 bps year over year to 14.1%.

Cloudflare’s Balance Sheet & Cash Flow

As of June 30, 2025, Cloudflare had cash, cash equivalents and available-for-sale securities of $3.96 billion, up from $1.91 billion as of March 31, 2025.

Cloudflare generated an operating cash flow of $99.8 million and a free cash flow of $33.3 million during the second quarter.

Cloudflare’s FY25 & Q3 Guidance

Buoyed by better-than-expected second-quarter results, Cloudflare raised guidance for full-year 2025. For 2025, it now anticipates revenues between $2,113.5 million and $2,115.5 million, up from the previous guidance of $2,090-$2,094 million. The consensus mark for revenues is pegged at $2.09 billion, suggesting a year-over-year rise of 25.4%.

Non-GAAP income from operations is now projected to be in the range of $284-$286 million, up from the earlier guided range of $272-$276 million. Non-GAAP earnings per share are now anticipated to be between 85 cents and 86 cents, up from the previous forecast of 79-80 cents. The Zacks Consensus Estimate for earnings is pegged at 79 cents per share, indicating a year-over-year increase of 5.3%.

Additionally, Cloudflare initiates guidance for the third quarter. It expects revenues in the $543.5-$544.5 million range for the second quarter. The Zacks Consensus Estimate for revenues is pegged at $537.7 million, suggesting a year-over-year rise of 25%.

Non-GAAP income from operations in the second quarter is expected to be between $75 million and $76 million. Non-GAAP earnings are anticipated to be 23 cents per share. The Zacks Consensus Estimate for earnings is pegged at 21 cents per share, indicating a year-over-year increase of 5%.

NET’s Zacks Rank and Stocks to Consider

Currently, Cloudflare carries a Zacks Rank #5 (Strong Sell).

Bumble BMBL, MongoDB MDB and Alkami Technology ALKT are some other top-ranked stocks that investors can consider in the Zacks Internet - Software industry. Bumble, MongoDB and Alkami Technology sport a Zacks Rank #1 (Strong Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Bumble’s 2025 earnings has been revised upwards over the past 30 days to $1.05 per share and suggests a year-over-year increase of 122.8%. Bumble shares have declined 4.5% year to date.

The Zacks Consensus Estimate for MongoDB’s fiscal 2026 earnings has been revised upward over the past 60 days to $3.07 per share, suggesting a decrease of 16.1% from the year-ago quarter’s reported figure. MongoDB shares have gained 2.2% year to date.

The Zacks Consensus Estimate for Alkami Technology’s 2025 earnings per share is pegged at 44 cents, remaining unchanged over the past 60 days, reflecting 51.7% year-over-year growth. Alkami Technology shares have plunged 39.3% year to date.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research