Cloudflare's Revenue Soars 31%, Net Loss Narrows to $1.3M

TL;DR

**Cloudflare's accelerating revenue and shrinking quarterly loss make it a strong buy, signaling a clear path to sustained profitability in the booming cybersecurity market.**

AI Summary

Cloudflare, Inc. (NET) reported robust revenue growth for the three and nine months ended September 30, 2025, reaching $562.0 million for the quarter, a 30.7% increase from $430.1 million in the prior year. Nine-month revenue climbed to $1.55 billion, up from $1.21 billion in 2024. Despite this growth, the company continues to report net losses, with a net loss of $1.3 million for the quarter, a significant improvement from a $15.3 million loss in Q3 2024. The nine-month net loss was $90.2 million, compared to $66.0 million in the same period last year. Operating expenses increased across the board, with sales and marketing rising to $236.3 million for the quarter (from $185.2 million) and research and development to $121.0 million (from $110.9 million). Cash and cash equivalents surged to $1.05 billion as of September 30, 2025, from $147.7 million at December 31, 2024, largely due to increased available-for-sale securities which grew from $1.71 billion to $2.99 billion. The current portion of convertible senior notes also increased substantially to $1.29 billion, indicating upcoming debt obligations.

Why It Matters

Cloudflare's continued revenue growth, up 30.7% year-over-year, demonstrates strong demand for its security, performance, and reliability solutions in a competitive cloud infrastructure market, directly impacting investor confidence. The narrowing net loss to $1.3 million for the quarter, despite increased operating expenses, suggests improved operational efficiency and a clearer path to profitability, which is crucial for long-term investors. For customers, this growth indicates Cloudflare's expanding network and product offerings, enhancing their digital presence. The substantial increase in cash and available-for-sale securities provides a strong financial buffer, allowing Cloudflare to invest in innovation and maintain its competitive edge against rivals like Akamai and Fastly.

Risk Assessment

Risk Level: medium — Cloudflare faces a 'medium' risk level due to its persistent net losses, totaling $90.2 million for the nine months ended September 30, 2025, despite significant revenue growth. Additionally, the current portion of convertible senior notes has surged to $1.29 billion, up from zero at December 31, 2024, indicating substantial short-term debt obligations that could impact liquidity if not managed effectively.

Analyst Insight

Investors should consider increasing their position in Cloudflare (NET) given the strong revenue growth of 30.7% and the significant reduction in quarterly net loss to $1.3 million. Monitor the company's ability to manage its increasing convertible senior notes and continue its path towards sustained profitability.

Financial Highlights

debt To Equity

3.29

revenue

$562.0M

operating Margin

-80.6%

total Assets

$5.79B

total Debt

$3.26B

net Income

-$1.3M

eps

N/A

gross Margin

73.9%

cash Position

$1.05B

revenue Growth

+30.7%

Revenue Breakdown

Key Numbers

• $562.0M — Revenue (for Q3 2025, up 30.7% from Q3 2024)
• $1.3M — Net Loss (for Q3 2025, significantly improved from $15.3M loss in Q3 2024)
• $1.05B — Cash and Cash Equivalents (as of September 30, 2025, up from $147.7M at Dec 31, 2024)
• $2.99B — Available-for-sale securities (as of September 30, 2025, up from $1.71B at Dec 31, 2024)
• $1.29B — Current Portion of Convertible Senior Notes (as of September 30, 2025, up from zero at Dec 31, 2024)
• $90.2M — Nine-Month Net Loss (for the period ended September 30, 2025, compared to $66.0M in 2024)
• 30.7% — Revenue Growth (year-over-year for the three months ended September 30, 2025)
• $236.3M — Sales and Marketing Expense (for Q3 2025, up from $185.2M in Q3 2024)
• $121.0M — Research and Development Expense (for Q3 2025, up from $110.9M in Q3 2024)
• 349,312 — Weighted-Average Shares Outstanding (for Q3 2025, used in EPS calculation)

Key Players & Entities

• Cloudflare, Inc. (company) — registrant
• SEC (regulator) — Securities and Exchange Commission
• New York Stock Exchange (regulator) — exchange for Class A Common Stock
• JD Cloud (company) — commercial relationship for China network presence
• $562,027 (dollar_amount) — revenue for three months ended September 30, 2025
• $430,082 (dollar_amount) — revenue for three months ended September 30, 2024
• $1,290 (dollar_amount) — net loss for three months ended September 30, 2025
• $15,331 (dollar_amount) — net loss for three months ended September 30, 2024
• $1,052,644 (dollar_amount) — cash and cash equivalents as of September 30, 2025
• $1,290,291 (dollar_amount) — current portion of convertible senior notes as of September 30, 2025

FAQ

Risk Factors

• Increasing Debt Obligations [high — financial]: The current portion of convertible senior notes has increased substantially to $1.29 billion as of September 30, 2025. This indicates significant upcoming debt maturities that could impact liquidity if not refinanced or repaid.
• Rising Operating Expenses [medium — operational]: Sales and marketing expenses increased to $236.3 million and R&D to $121.0 million for Q3 2025. While indicative of growth investment, sustained high operating expenses without corresponding revenue acceleration could pressure profitability.
• Intense Competition [medium — market]: Cloudflare operates in a highly competitive market for cloud infrastructure and security services. Competitors may offer similar or alternative solutions, potentially impacting market share and pricing power.
• Data Privacy and Security Regulations [medium — regulatory]: As a global provider of internet infrastructure and security, Cloudflare is subject to evolving data privacy and security regulations worldwide. Non-compliance could lead to significant fines and reputational damage.
• Continued Net Losses [medium — financial]: Despite revenue growth, Cloudflare continues to report net losses, with a $1.3 million loss in Q3 2025 and a $90.2 million loss for the nine months ended September 30, 2025. Achieving profitability remains a key challenge.

Industry Context

Cloudflare operates in the rapidly expanding cloud infrastructure and cybersecurity markets. Key trends include the increasing demand for edge computing, enhanced security solutions against sophisticated cyber threats, and the shift towards hybrid and multi-cloud environments. The competitive landscape is intense, with major cloud providers and specialized security firms vying for market share.

Regulatory Implications

Cloudflare faces significant regulatory scrutiny related to data privacy (e.g., GDPR, CCPA) and cybersecurity standards. Compliance with these evolving regulations is critical to avoid penalties and maintain customer trust. The company's global operations necessitate navigating a complex web of international legal frameworks.

What Investors Should Do

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Key Dates

• 2025-09-30: Q3 2025 Earnings Report — Demonstrated strong revenue growth of 30.7% year-over-year, but also highlighted increasing operating expenses and a substantial rise in convertible debt.
• 2025-12-31: Previous Fiscal Year End — Provided the baseline for year-over-year comparisons, showing a significantly lower cash position and no current portion of convertible senior notes.

Glossary

Available-for-sale securities

Investments that are not classified as held-to-maturity or trading securities. They are reported at fair value, with unrealized gains and losses included in other comprehensive income. (Cloudflare's substantial increase in these securities from $1.71 billion to $2.99 billion indicates a significant portion of its assets are invested, impacting liquidity and potential returns.)

Convertible senior notes

Debt securities that can be converted into a predetermined amount of the issuer's stock. They typically carry a lower interest rate than traditional debt. (The emergence of a $1.29 billion current portion of these notes signals a material upcoming obligation that investors need to monitor for potential dilution or repayment needs.)

Contract assets

Represents Cloudflare's right to consideration in exchange for goods or services that have been transferred to a customer when that right is conditional on something other than the passage of time. (An increase in contract assets from $16.6 million to $22.6 million suggests growing revenue recognition tied to future performance obligations.)

Deferred revenue

Revenue that has been received by the company but not yet earned. It represents future obligations to deliver goods or services. (The significant increase in deferred revenue (current and noncurrent) from $477.8M + $22.1M in Dec 2024 to $599.0M + $45.9M in Sep 2025 indicates strong future revenue potential.)

Accumulated deficit

The total cumulative net losses of a company since its inception, less any cumulative net income. (Cloudflare's accumulated deficit increased from ($1.10 billion) to ($1.19 billion), reflecting its ongoing investment and net losses.)

Year-Over-Year Comparison

Compared to the prior year's filing (likely Q3 2024), Cloudflare has demonstrated impressive revenue growth, with Q3 2025 revenue up 30.7% to $562.0 million. However, operating expenses have also risen significantly, particularly in sales and marketing and R&D. While the company's cash position has strengthened considerably, this is largely due to an increase in available-for-sale securities, and a substantial convertible debt obligation has emerged, which was not present in the prior period. Net losses have narrowed on a quarterly basis but widened over the nine-month period, indicating ongoing investment in growth.

Key Financial Figures

• $0.001 — Which Registered Class A Common Stock, $0.001 par value NET The New York Stock Exchan

Filing Documents

• cloud-20250930.htm (10-Q) — 2078KB
• ex311q3202510-q.htm (EX-31.1) — 12KB
• ex312q3202510-q.htm (EX-31.2) — 12KB
• ex321q3202510-q.htm (EX-32.1) — 8KB
• 0001477333-25-000141.txt ( ) — 9111KB
• cloud-20250930.xsd (EX-101.SCH) — 56KB
• cloud-20250930_cal.xml (EX-101.CAL) — 97KB
• cloud-20250930_def.xml (EX-101.DEF) — 359KB
• cloud-20250930_lab.xml (EX-101.LAB) — 682KB
• cloud-20250930_pre.xml (EX-101.PRE) — 534KB
• cloud-20250930_htm.xml (XML) — 1219KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION Page

Financial Statements (unaudited)

Item 1 Financial Statements (unaudited) 8 Condensed Consolidated Balance Sheets as of September 30, 2025 and December 31, 202 4 8 Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2025 and 2024 9 Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2025 and 2024 10 Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2025 and 2024 11 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 15 Notes to Condensed Consolidated Financial Statements 16

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 34

Quantitative and Qualitative Disclosures about Market Risk

Item 3 Quantitative and Qualitative Disclosures about Market Risk 51

Controls and Procedures

Item 4 Controls and Procedures 52

OTHER INFORMATION

PART II. OTHER INFORMATION

Legal Proceedings

Item 1 Legal Proceedings 54

Risk Factors

Item 1A Risk Factors 54

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 106

Other Information

Item 5 Other Information 106

Exhibits

Item 6 Exhibits 107

Signatures

Signatures 109 4 Table of contents SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential," or "continue," or the negative of these words, or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about: our ability to retain and upgrade paying customers; our ability to attract new paying customers, including large customers, or convert free customers to paying customers; our future financial performance, including trends in revenue, costs of revenue, gross profit or gross margin, operating expenses, paying customers, and free cash flow; our ability to achieve or maintain profitability and positive cash flow; the impact of adverse economic conditions on our customers' spending ability and the overall demand for our products; the consequences we may face resulting from the activities of our customers and the actions we take in response, including associated theories of liability; the demand, and our ability to generate demand, for our products or for solutions for security, performance, and reliability in general; possible harm caused by significant disruption of service, loss or unauthorized access to customers' content, or the actual or perceived failure of

—FINANCIAL INFORMATION

PART I—FINANCIAL INFORMATION

FINANCIAL STATEMENTS

Item 1. FINANCIAL STATEMENTS CLOUDFLARE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par value) (unaudited) September 30, 2025 December 31, 2024 Assets Current assets: Cash and cash equivalents $ 1,052,644 $ 147,691 Available-for-sale securities 2,990,864 1,708,228 Accounts receivable, net 351,890 316,753 Contract assets 22,645 16,568 Restricted cash short-term 4,373 4,273 Prepaid expenses and other current assets 114,349 75,484 Total current assets 4,536,765 2,268,997 Property and equipment, net 588,361 467,420 Goodwill 181,087 181,087 Acquired intangible assets, net 18,411 21,865 Operating lease right-of-use assets 222,148 168,379 Deferred contract acquisition costs, noncurrent 194,035 172,217 Restricted cash 2,475 2,250 Other noncurrent assets 43,113 18,947 Total assets $ 5,786,395 $ 3,301,162 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 85,878 $ 105,807 Accrued expenses and other current liabilities 92,514 81,602 Accrued compensation 90,201 80,854 Operating lease liabilities 65,321 47,626 Deferred revenue 598,978 477,765 Current portion of convertible senior notes, net 1,290,291 — Total current liabilities 2,223,183 793,654 Convertible senior notes, net 1,972,707 1,287,321 Operating lease liabilities, noncurrent 173,432 128,266 Deferred revenue, noncurrent 45,900 22,095 Other noncurrent liabilities 24,157 23,625 Total liabilities 4,439,379 2,254,961 Commitments and contingencies (Note 8) Stockholders' Equity Class A common stock; $ 0.001 par value; 2,250,000 shares authorized as of September 30, 2025 and December 31, 2024; 315,165 and 307,892 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively 314 307 Class B common stock; $ 0.001 par value; 315,000 shares authorized as of September 30, 2025 and December 31, 2024; 35,037 and 36,963 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively 35 3