Cloudflare Stock Rises 8% as Q3 Earnings and Revenues Crush Estimates

Cloudflare, Inc. NET shares jumped 8.1% during Thursday’s extended trading session after the company reported better-than-expected third-quarter 2025 results. NET reported non-GAAP earnings of 27 cents per share for the third quarter of 2025, beating the Zacks Consensus Estimate by 17.4%. The bottom line increased 35% on a year-over-year basis.

Cloudflare’s earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and met in one, delivering an average surprise of 9.9%.

Cloudflare’s third-quarter revenues increased 31% year over year to $562 million, which surpassed the consensus mark by 3.3%. 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’s Q3 Details

Cloudflare’s top-line performance was positively impacted by its mix of customer segments (Channel Partners and Direct Customers). Revenues from Channel Partners (26.7% of total revenues) were $149.9 million, up 34.8% year over year. Third-quarter revenues from Direct Customers (73.3% of total revenues) were $412.2 million, up 20.8% year over year.

Cloudflare had 295,552 paying customers at the end of the third quarter, up 33.4% year over year. It added 297 new customers during the quarter who contributed more than $100,000 in annual revenues. The total count of such customers reached 4,009 at the end of the quarter.

Cloudflare’s third-quarter non-GAAP gross profit increased 24.8% year over year to $423.1 million. However, the non-GAAP gross margin contracted 350 basis points (bps) year over year to 75.3%.

Non-GAAP operating income for the quarter jumped 35.4% year over year to $85.9 million. The non-GAAP operating margin expanded 50 bps year over year to 15.3%.

Cloudflare’s Balance Sheet & Cash Flow

As of Sept. 30, 2025, Cloudflare had cash, cash equivalents and available-for-sale securities of $4.04 billion, up from $3.96 billion as of June 30, 2025.

Cloudflare generated an operating cash flow of $167.1 million and a free cash flow of $104.7 million during the third quarter. In the first three quarters of 2025, it generated operating and free cash flows of $412.7 million and $161.1 million, respectively.

Cloudflare’s FY25 & Q4 Guidance

Buoyed by better-than-expected third-quarter results, Cloudflare raised guidance for full-year 2025. For 2025, it now anticipates revenues between $2,142 million and $2,143 million, up from the previous guidance range of $2,113.5-$2,115.5 million. The consensus mark for revenues is pegged at $2.11 billion, suggesting a year-over-year rise of 26.7%.

Non-GAAP income from operations is now projected in the range of $297-$298 million, up from the earlier guided range of $284-$286 million. Non-GAAP earnings per share are now anticipated to be 91 cents, up from the previous forecasted range of 85-86 cents. The Zacks Consensus Estimate for earnings is pegged at 85 cents per share, indicating a year-over-year increase of 13.3%.

Additionally, Cloudflare initiates guidance for the fourth quarter. It expects revenues in the $588.5-$589.5 million range for the fourth quarter. The Zacks Consensus Estimate for revenues is pegged at $578.8 million, suggesting a year-over-year rise of 25.9%.

Non-GAAP income from operations in the fourth quarter is expected to be between $83 million and $84 million. Non-GAAP earnings are anticipated to be 27 cents per share. The Zacks Consensus Estimate for earnings is pegged at 26 cents per share, indicating a year-over-year increase of 36.8%.

Cloudflare’s Zacks Rank & Stocks to Consider

Currently, NET carries a Zacks Rank #3 (Hold).

Credo Technology Group CRDO, Amphenol APH and Impinj PI are some better-ranked stocks that investors can consider in the Zacks Computer and Technology sector. Credo Technology Group and Amphenol each sport a Zacks Rank #1 (Strong Buy) at present, while Impinj carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Credo Technology Group’s fiscal 2026 earnings has been revised upward by a cent over the past 30 days to $2.04 per share, implying an increase of 191.4% year over year. Credo Technology Group shares have surged 155.4% year to date.

The Zacks Consensus Estimate for Amphenol’s full-year 2025 earnings has moved upward to $3.22 per share from $3.18 per share in the past seven days, calling for 70.4% year-over-year growth. Amphenol shares have risen 100.3% year to date.

The Zacks Consensus Estimate for Impinj’s full-year 2025 earnings is pegged at $1.98 per share, revised upward by 4 cents over the past 30 days and suggests a year-over-year decline of 6.2%. Impinj shares have soared 41.9% year to date.

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

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