Cloudflare Inc ((NET)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Cloudflare’s latest earnings call exuded a positive sentiment, underscored by strong financial and operational results. The company reported robust revenue growth and strategic partnerships as key drivers of its success. Despite the departure of a key executive, Cloudflare’s future outlook remains optimistic, buoyed by increased sales productivity and strategic investments in AI and partnerships.
Revenue Growth and Large Customer Expansion
Cloudflare achieved a remarkable revenue of $562 million, marking a 30.7% increase year-over-year. The growth was significantly driven by large customers, those paying over $100,000 annually, who increased by 23% year-over-year and contributed to 73% of the total revenue.
Strong Operating and Financial Performance
The company reported an operating profit of $85.9 million with an operating margin of 15.3%. Free cash flow exceeded expectations, reaching $75 million, highlighting Cloudflare’s strong financial footing.
Partnerships and Strategic Wins
Cloudflare expanded its strategic relationships with high-profile companies, including a Global 2000 digital media platform and a leading European technology company, securing significant multi-year contracts.
Innovation and AI Integration
The adoption of Cloudflare’s Workers developer platform for running AI inference tasks has been significant, contributing to the company’s ongoing growth and innovation.
Sales and Market Strategy Success
Sales productivity has increased for the seventh consecutive quarter, with close rates and bookings from partner-initiated opportunities doubling year-over-year, reflecting a successful market strategy.
Departure of Key Executive
CJ Desai, a key product and engineering leader, is leaving Cloudflare to assume a CEO position at another public technology company, marking a notable change in the company’s leadership.
Gross Margin Decline
Cloudflare experienced a decline in gross margin to 75.3% from 76.3% sequentially and 78.8% year-over-year, attributed to increased paid versus free customer traffic.
Forward-Looking Guidance
Looking ahead, Cloudflare provided guidance for Q4 2025, expecting revenue between $588.5 million and $589.5 million, with an operating income range of $83 million to $84 million. For the full year 2025, they anticipate revenue of $2.142 billion to $2.143 billion and operating income between $297 million and $298 million.
In conclusion, Cloudflare’s earnings call highlighted a positive sentiment with strong financial performance and strategic initiatives. The company’s robust revenue growth, strategic partnerships, and innovation in AI integration position it well for future success, despite the challenges posed by executive changes and gross margin pressures.