Cloudflare — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenue for the third quarter ended September 30, 2026, was $782.5 million, a 39% increase year-over-year compared to $562.0 million in the third quarter of 2025.
• GAAP gross profit was $557.2 million (71.2% margin), compared to $415.7 million (74.0% margin) in the prior year period; Non-GAAP gross profit was $566.6 million (72.4% margin) compared to $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 the third quarter of 2025; Non-GAAP income from operations was $137.1 million (17.5% of revenue), compared to $85.9 million (15.3% of revenue).
• 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 the third quarter of 2025; Non-GAAP net income was $143.7 million ($0.38 per share), compared to $102.6 million ($0.27 per share).
• Net cash flow from operating activities was $215.4 million, compared to $167.1 million in the third quarter of 2025.
• Free cash flow was $82.1 million (10% of revenue), compared to $75.0 million (13% of revenue) in the third quarter of 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 as of September 30, 2026, from $684.2 million as of December 31, 2025.
• Current RPO grew 37% year-over-year.
• Total operating expenses were $625.2 million, including $11.0 million in restructuring and other charges, compared to $453.2 million with no restructuring charges in the prior year period.

Guidance and Future Outlook:

• For the fourth quarter of fiscal 2026, total revenue is expected to be between $845.0 million and $846.0 million.
• Non-GAAP income from operations for the fourth quarter is expected to be between $156.0 million and $157.0 million.
• Non-GAAP net income per share for the fourth quarter is expected to be $0.43, utilizing approximately 379 million weighted average common shares outstanding.
• For the full year fiscal 2026, total revenue is expected to be between $2,963.0 million and $2,964.0 million.
• Non-GAAP income from operations for the full year is expected to be between $462.0 million and $463.0 million.
• Non-GAAP net income per share for the full year is expected to be $1.35, utilizing approximately 376 million weighted average common shares outstanding.

Business Segments and Product Lines:

• The company describes itself as having built the development platform for the AI-powered Internet.
• The company notes that organizations of every size continue to rely on Cloudflare for protection as digital threats escalate.
• The company is evolving to an agentic AI-first operating model and aligning its organizational structure with this new model.
• The company plans to implement a plan to further accelerate its evolution to an agentic AI-first operating model, including an estimated reduction of its current workforce and associated charges.

Market and Competitive Landscape:

• Cloudflare is identified as the leading connectivity cloud company.
• The company blocks billions of threats online for its customers every day.
• The company is trusted by millions of organizations, ranging from the largest brands to entrepreneurs, small businesses, nonprofits, humanitarian groups, and governments.
• The company utilizes one of the world's largest and most interconnected networks.

Risks and Challenges:

• Forward-looking statements involve substantial risks and uncertainties, including adverse macroeconomic conditions, geopolitical tensions (particularly in Eastern Europe or the Middle East), and threats of tariffs.
• Risks include the company's history of net losses, challenges in managing growth, and the ability to attract and retain new customers or convert free customers to paying customers.
• Risks include the ability to expand the number of products sold, increase sales to large customers, and effectively incorporate AI tools to maintain operational efficiency.
• Risks include the ability to attract, train, and retain a sales force, as well as the ability to attract, integrate, and retain key personnel.
• Risks include potential problems with internal systems, network, or data, including breaches or failures, and rapidly evolving technological developments in AI.
• Risks include the length of sales cycles, foreign currency fluctuations, and changes in the legal, tax, and regulatory environment.

Management Commentary and Tone:

• Matthew Prince, co-founder & CEO, stated the third quarter was Cloudflare's best quarter ever, noting the company crossed $3 billion in annualized revenue.
• Management reported accelerating growth, delivering their fastest revenue growth in nearly four years while expanding profitability.
• CEO Prince stated the company's engine is "firing on all cylinders" and has found a higher gear for the next phase of growth.

Other Key Points:

• The company hosted an investor conference call on November 5, 2026, at 2:00 p.m. Pacific time to discuss the results.
• The company repaid $1,293.75 million in convertible senior notes during the nine months ended September 30, 2026.
• The company issued $2,500 million in convertible senior notes during the nine months ended September 30, 2026.
• The company incurred $11.0 million in restructuring and other charges in the third quarter of 2026, primarily related to the planned organizational realignment and workforce reduction.
• The company recorded $10.7 million in legal reserve and settlements within general and administrative expenses in the third quarter of 2026.
• The company's balance sheet shows a significant increase in cash and cash equivalents to $1,969.5 million as of September 30, 2026, compared to $943.5 million as of December 31, 2025.
• Goodwill increased to $375.8 million as of September 30, 2026, from $226.6 million as of December 31, 2025.
• The company disclosed that it intends to use various channels including its website, X account, and SEC filings to disclose material non-public information.