Cloudflare — Second Quarter 2026 Earnings Summary

Financial Performance

• Total revenue for the second quarter ended June 30, 2026, was $696.1 million, a 36% increase year-over-year compared to $512.3 million in the second quarter of 2025.
• GAAP gross profit was $499.5 million (71.8% margin), down from $383.6 million (74.9% margin) in the prior year period; Non-GAAP gross profit was $508.9 million (73.1% margin), down from $390.7 million (76.3% margin).
• GAAP loss from operations was $205.7 million (29.6% of revenue) compared to a loss of $67.3 million (13.1% of revenue) in the second quarter of 2025; Non-GAAP income from operations was $96.1 million (13.8% of revenue), up from $72.3 million (14.1% of revenue).
• GAAP net loss was $170.0 million ($0.48 per share) compared to a net loss of $50.4 million ($0.15 per share) in the prior year; Non-GAAP net income was $107.8 million ($0.29 per share), up from $75.1 million ($0.21 per share).
• Net cash flow from operating activities was $117.6 million, up from $99.8 million in the second quarter of 2025.
• Free cash flow was $56.4 million (8% of revenue), an increase from $33.3 million (6% of revenue) in the second quarter of 2025.
• Cash, cash equivalents, and available-for-sale securities totaled $4,162.8 million as of June 30, 2026.
• Current RPO grew 35% year-over-year.

Guidance and Future Outlook

• For the third quarter of fiscal 2026, total revenue is expected to be between $736.0 million and $737.0 million.
• Non-GAAP income from operations for Q3 2026 is projected to be between $129.0 million and $130.0 million.
• Non-GAAP net income per share for Q3 2026 is expected to be $0.34, based on approximately 374 million weighted average common shares outstanding.
• For the full year fiscal 2026, total revenue is forecast between $2,864.0 million and $2,870.0 million.
• Full-year 2026 Non-GAAP income from operations is projected to be between $443.0 million and $445.0 million.
• Full-year 2026 Non-GAAP net income per share is expected to be between $1.25 and $1.26.

Business Segments and Product Lines

• The press release highlights record growth in total paying customers, large customers, and developers on the platform.
• Management identifies a shift toward AI answer engines and agent-driven commerce, positioning Cloudflare to build infrastructure and payment rails for the "Agentic Internet."
• The company is evolving to an "agentic AI-first operating model" and aligning its organizational structure accordingly.
• The press release mentions an estimated reduction of the current workforce and associated charges, though specific segment revenue breakdowns are not provided.

Market and Competitive Landscape

• Cloudflare describes itself as the leading connectivity cloud company.
• The company notes a fundamental rewrite of the Internet for machine-to-machine traffic driven by the shift to AI answer engines.
• No specific market share data or direct competitor comparisons are included in the text.

Risks and Challenges

• Significant risks include adverse macroeconomic conditions, geopolitical tensions (particularly in Eastern Europe or the Middle East), and trade impediments.
• Challenges include the company's history of net losses, the ability to attract and retain customers, and the length of sales cycles.
• Risks also encompass the ability to incorporate AI tools to maintain efficiency, data security breaches, and regulatory changes.
• The press release explicitly mentions the risk of actual results differing materially from forward-looking statements regarding the AI-first operating model and workforce reduction.

Management Commentary and Tone

• CEO Matthew Prince described the quarter as "stellar," citing revenue acceleration and record customer growth.
• Management expressed confidence that Cloudflare is "better positioned than any company" to define the future of the web's changing business model.
• The tone emphasizes a strategic pivot toward the "Agentic Internet" and the expectation of a fundamental rewrite of the Internet for machine-to-machine traffic.

Other Key Points

• The company incurred $150.7 million in restructuring and other charges in the second quarter of 2026, which were excluded from Non-GAAP measures.
• Stock-based compensation and related employer payroll taxes totaled $140.6 million for the quarter.
• The company plans to host an investor conference call on August 6, 2026, at 2:00 p.m. Pacific time.
• The press release includes a detailed reconciliation of GAAP to Non-GAAP financial measures, excluding items such as stock-based compensation, amortization of intangibles, and restructuring charges.