Cloudflare — Third Quarter 2026 Earnings Summary

Financial Performance

• Total revenue reached $782.5 million, a 39% increase year-over-year compared to $562.0 million in Q3 2025.
• GAAP gross profit was $557.2 million (71.2% margin), down from $415.7 million (74.0% margin) in Q3 2025; Non-GAAP gross profit was $566.6 million (72.4% margin), up from $423.1 million (75.3% margin).
• GAAP loss from operations was $67.9 million (8.7% of revenue), compared to a loss of $37.5 million (6.7% of revenue) in Q3 2025.
• Non-GAAP income from operations was $137.1 million (17.5% of revenue), up from $85.9 million (15.3% of revenue) in Q3 2025.
• GAAP net loss was $34.1 million ($0.10 per share), compared to a net loss of $1.3 million ($0.00 per share) in Q3 2025.
• Non-GAAP net income was $143.7 million ($0.38 per diluted share), up from $102.6 million ($0.27 per diluted share) in Q3 2025.
• Net cash flow from operating activities was $215.4 million, compared to $167.1 million in Q3 2025.
• Free cash flow was $82.1 million (10% of revenue), compared to $75.0 million (13% of revenue) in Q3 2025.
• Cash, cash equivalents, and available-for-sale securities totaled $5,128.7 million as of September 30, 2026.
• Deferred revenue increased to $876.8 million (current) and $39.4 million (noncurrent) as of September 30, 2026, from $684.2 million (current) and $41.1 million (noncurrent) as of December 31, 2025.
• Current RPO grew 37% year-over-year.

Guidance and Future Outlook

• Q4 2026 total revenue is expected to be between $845.0 million and $846.0 million.
• Q4 2026 Non-GAAP income from operations is projected between $156.0 million and $157.0 million.
• Q4 2026 Non-GAAP net income per share is estimated at $0.43, based on approximately 379 million weighted average shares.
• Full-year 2026 total revenue is forecast between $2,963.0 million and $2,964.0 million.
• Full-year 2026 Non-GAAP income from operations is projected between $462.0 million and $463.0 million.
• Full-year 2026 Non-GAAP net income per share is estimated at $1.35, based on approximately 376 million weighted average shares.

Business Segments and Product Lines

• The company describes itself as the leading connectivity cloud company building a development platform for the AI-powered Internet.
• Management stated the company crossed $3 billion in annualized revenue.
• The company blocks billions of threats online daily for millions of organizations.
• Specific segment revenue breakdowns or new product launch details beyond the general connectivity cloud platform are not provided in the text.

Market and Competitive Landscape

• Management noted that digital threats are escalating, driving reliance on Cloudflare for protection across organizations of all sizes.
• The company reported its fastest revenue growth in nearly four years.
• No specific market share data or direct competitor comparisons are included in the press release.

Risks and Challenges

• Forward-looking statements involve risks including adverse macroeconomic conditions, geopolitical tensions (particularly in Eastern Europe or the Middle East), and potential trade impediments.
• Risks include the company's history of net losses, challenges in attracting/retaining customers, and converting free users to paying customers.
• Potential risks involve the ability to innovate, incorporate AI tools, manage sales cycles, and retain key personnel.
• Operational risks include system failures, data breaches, and foreign currency fluctuations.
• The press release notes a plan to align organizational structure with an "agentic AI-first operating model," including an estimated workforce reduction and associated charges, though specific figures for the reduction or charges are not detailed in the summary text.
• Legal reserve and settlements charges of $10.7 million were recorded in Q3 2026.

Management Commentary and Tone

• CEO Matthew Prince described the quarter as the company's "best quarter ever," citing accelerated growth and expanded profitability.
• Management stated the company has "found an even higher gear for this next phase of growth" and that their engine is "firing on all cylinders."
• The tone emphasizes confidence in the AI-powered Internet platform and the necessity of their security services amidst escalating digital threats.

Analyst Questions and Answers

• No specific analyst questions or answers are included in the press release text.

Other Key Points

• The company issued $2.5 billion in convertible senior notes during the nine months ended September 30, 2026.
• The company repaid $1.29 billion of convertible senior notes during the nine months ended September 30, 2026.
• Goodwill increased to $375.8 million as of September 30, 2026, from $226.6 million as of December 31, 2025, likely due to acquisitions.
• Asset acquisitions and business combinations cost $74.3 million in the nine months ended September 30, 2026.
• Restructuring and other charges of $11.0 million were recorded in Q3 2026, with $161.7 million recorded in the nine-month period.
• Legal reserve and settlements charges of $10.7 million were recorded in Q3 2026.
• The company will host an investor conference call on November 5, 2026, at 2:00 p.m. Pacific time.