Cloudflare Stock Rises 8% as Q1 Earnings Match Estimates, Revenues Top

Cloudflare, Inc. NET shares gained 8.4% during Thursday’s extended trading session after the company reported non-GAAP earnings of 16 cents per share for the first quarter of 2025 that matched the Zacks Consensus Estimate. The bottom line was also flat on a year-over-year basis as the benefits of higher revenues were fully offset by increased costs, higher interest expenses as well as taxes.

Cloudflare’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and met in one, delivering an average surprise of 14.9%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

First-quarter revenues increased 27% year over year to $479.1 million, which surpassed the consensus mark by 2.2%. 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 Q1 Details

Cloudflare’s top-line performance was positively impacted by its mix of customer segments (Channel Partners and Direct Customers). Revenues from Channel Partners (23% of total revenues) were $112.6 million, up 59.8% year over year. First-quarter revenues from Direct Customers (77% of total revenues) were $366.5 million, up 18.9% year over year.

Cloudflare had 250,819 paying customers at the end of the first quarter, up 27% year over year. It added 30 new customers during the quarter who contributed more than $100,000 in annual revenues. The total count of such customers reached 3,527 at the end of the quarter.

Cloudflare’s first-quarter non-GAAP gross profit increased 22.7% year over year to $369.3 million. However, the non-GAAP gross margin contracted 240 basis points (bps) year over year to 77.1%.

Non-GAAP operating income for the quarter jumped to $56 million from $42.4 million in the year-ago quarter. The non-GAAP operating margin expanded 50 bps year over year to 11.7%.

Cloudflare’s Balance Sheet & Cash Flow

As of March 31, 2025, Cloudflare had cash, cash equivalents and available-for-sale securities of $1.91 billion, up from $1.86 billion as of Dec. 31, 2024.

Cloudflare generated an operating cash flow of $145.8 million and a free cash flow of $52.9 million during the first quarter.

Cloudflare’s FY25 & Q2 Guidance

NET reiterated its guidance for full-year 2025. For 2025, it continues to anticipate revenues between $2.09 billion and $2.094 billion. The consensus mark for revenues is pegged at $2.09 billion, suggesting a year-over-year rise of 25.3%.

Non-GAAP income from operations is still projected to be in the range of $272-$276 million. Non-GAAP earnings per share are still anticipated to be between 79 cents and 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 second quarter. It expects revenues in the $500-$501 million range for the second quarter. The Zacks Consensus Estimate for revenues is pegged at $500.9 million, suggesting a year-over-year rise of 24.9%.

Non-GAAP income from operations in the second quarter is expected to be between $62.5 million and $63.5 million. Non-GAAP earnings are anticipated to be 18 cents per share. The Zacks Consensus Estimate for earnings is pegged at 19 cents per share, indicating a year-over-year decline of 5%.

NET’s Zacks Rank and Stocks to Consider

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

Impinj PI, StoneCo STNE and Broadcom AVGO are some top-ranked stocks that investors can consider in the broader Zacks Computer and Technology sector. While both Impinj and StoneCo sport a Zacks Rank #1 (Strong Buy) at present, Broadcom 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 Impinj’s 2025 earnings has been revised upward by 21 cents to $1.68 per share over the past 30 days, and suggests a year-over-year decrease of 20.4%. Impinj shares have plunged 39% over the past year.

The Zacks Consensus Estimate for StoneCo’s 2025 earnings has moved upward by 12 cents to $1.38 per share in the past 30 days, reflecting 2.2% year-over-year growth. StoneCo shares have plunged 16.8% in the trailing 12 months.

The Zacks Consensus Estimate for Broadcom’s fiscal 2025 earnings has been revised upward by 4 cents to $6.60 per share in the past 60 days, suggesting an increase of 35.5% from fiscal 2024’s reported figure. Broadcom shares have rallied 55.9% over the past year.

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