Cloudflare's stock mounts a big comeback after fastest sales surge in nearly 4 years

By Christine Ji

Demand for automated AI protection is on the rise - and manifesting in Cloudflare's earnings results

Cloudflare set new records for the number of customers added on both a quarterly and annual basis.

Cloudflare shares rocketed nearly 15% in extended trading Thursday after a blowout earnings report helped reverse sour sentiment.

Fueled by demand for artificial-intelligence cybersecurity solutions, Cloudflare's (NET) third-quarter revenue grew 39% from a year before to $782.5 million - its fastest revenue growth rate in nearly four years. Adjusted earnings came out to 38 cents per share.

Wall Street analysts' consensus estimates were tracking $737.2 million and 34 cents, respectively.

The web infrastructure and security firm inspects online traffic, helps sites load quickly and acts as a tollbooth for AI bots. Cloudflare operates a globally distributed network instead of centralized data centers, meaning that the company can inspect web traffic and block threats closer to where users are. The approach is more cost-effective than that of hyperscalers and neoclouds, Cloudflare noted on its earnings call.

In the company's earnings release, CEO Matthew Prince cited an acceleration in enterprise customer demand. During the quarter, Cloudflare crossed the threshold of $3 billion in annualized revenue.

Shares of Cloudflare had fallen 8.3% during Thursday's regular trading session, as cybersecurity stocks sold off amid broader market weakness. But Cloudflare's earnings showed that customers are flocking to the company to protect their data from agentic AI threats, which have increased in severity recently.

Since the beginning of July, Cloudflare has added roughly 5% of the entire global web to its network - more than the combined market footprint of all its direct web-routing rivals, Prince said. "We've partnered with nearly every major frontier AI lab and security company searching for flaws in existing software."

Cloudflare brought in 308 large customers during the quarter and nearly 1,000 over the past year, setting fresh company records for customer additions on both a quarterly and annual basis.

The company has been able to scale its business while reducing costs. Operating expenses, the day-to-day costs of running the business, came out to 55% of revenue, falling by over 5 percentage points relative to a year before.

For the fourth quarter, Cloudflare projected revenue between $845 million and $846 million and adjusted earnings of 43 cents per share. That surpassed Wall Street estimates for $796 million and 38 cents per share, respectively.

-Christine Ji

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11-05-26 2006ET