Cloudflare Inc ((NET)) has held its Q1 earnings call. Read on for the main highlights of the call.
Cloudflare’s recent earnings call revealed a generally positive sentiment, highlighted by impressive financial performance and significant growth in revenue. The company showcased its ability to secure large deals, particularly in the enterprise sector, despite facing challenges like flat net retention and a decrease in gross margin. Overall, the positive aspects of the earnings report overshadowed the negatives, suggesting a favorable outlook for the company.
Strong Revenue Growth
Cloudflare reported a remarkable revenue of $479.1 million, marking a 27% increase compared to the previous year. This substantial growth underscores the company’s successful strategies in expanding its market presence and enhancing its service offerings.
Increase in Large Customers
The company ended the quarter with 3,527 customers paying more than $100,000 annually, representing a 23% increase year-over-year. This growth in large customers highlights Cloudflare’s ability to attract and retain high-value clients, contributing significantly to its revenue stream.
Record Deal Size
Cloudflare achieved a milestone by landing the largest contract in its history, valued at over $100 million. This deal was primarily driven by the company’s Workers developer platform, showcasing its innovative solutions and appeal to large enterprises.
High Sales Productivity
The company reported another double-digit year-over-year improvement in sales productivity, reflecting the effectiveness of its sales strategies and the dedication of its sales team in driving growth.
Robust Free Cash Flow
Cloudflare generated a strong free cash flow of $52.9 million during the quarter. This robust cash flow indicates the company’s solid financial health and its ability to invest in future growth opportunities.
Flat Dollar-based Net Retention
The dollar-based net retention rate was 111%, remaining flat quarter-to-quarter. While this indicates stable customer retention, it also suggests potential areas for improvement in upselling and cross-selling strategies.
Decrease in Gross Margin
The gross margin was reported at 77.1%, a decrease of 240 basis points year-over-year. This decline reflects some cost pressures, but the company remains above its long-term target, indicating resilience in its financial management.
Forward-looking Guidance
Cloudflare provided optimistic forward-looking guidance, anticipating Q2 2025 revenue between $500 million and $501 million and full-year 2025 revenue between $2,090 million and $2,094 million. This projection represents a 25% growth year-over-year, reflecting the company’s confidence in its continued expansion and market penetration.
In summary, Cloudflare’s earnings call demonstrated a strong financial performance with significant revenue growth and successful large deal acquisitions. Despite some challenges, the overall sentiment was positive, with forward-looking guidance indicating continued growth and expansion in the coming quarters.