10-QPeriod: Q1 FY2026

Cloudflare, Inc. Quarterly Report for Q1 Ended Mar 31, 2026

Filed May 8, 2026For Securities:NET

Summary

Cloudflare, Inc.'s (NET) Q1 2026 filing demonstrates continued robust revenue growth, with total revenue reaching $639.8 million, a 34% increase year-over-year. This growth is primarily attributed to the acquisition of new paying customers and the expansion of services for existing large enterprise clients, as evidenced by a dollar-based net retention rate of 118%. Despite revenue growth, the company reported a net loss of $22.9 million for the quarter. This loss, while narrowing from the previous year's $38.5 million loss, indicates ongoing investment in growth and operations. The company's financial position remains strong with $932.2 million in cash and cash equivalents and $3.2 billion in available-for-sale securities, providing ample liquidity. Cloudflare also announced a significant strategic initiative to evolve towards an agentic AI-first operating model, which includes a workforce reduction of approximately 20%, expected to incur charges between $140 million and $150 million in Q2 2026. Investors should monitor the execution of this AI strategy and its impact on future profitability and operational efficiency.

Financial Highlights

48 data points
Beta

Revenue

$639.75M

71.2% Gross Margin

Net Income

-$22.93M

-3.6% Net Margin

EPS (Diluted)

$-0.07

Total Assets

$6.16B

Cash & Equivalents

$932.23M

Free Cash Flow

$93.10M

Financial Statements
Beta
Revenue$639.75M
Cost of Revenue$184.16M
Gross Profit$455.60M
R&D Expenses$150.97M
Operating Expenses$517.59M
Operating Income-$61.99M
Net Income-$22.93M
EPS (Basic)$-0.07
EPS (Diluted)$-0.07
Shares Outstanding (Basic)352.63M
Shares Outstanding (Diluted)352.63M

Key Highlights

  • 1Revenue increased by 34% year-over-year to $639.8 million in Q1 2026.
  • 2Net loss for the quarter was $22.9 million, a decrease from $38.5 million in Q1 2025.
  • 3Dollar-based net retention rate was 118% for Q1 2026, indicating strong customer loyalty and expansion.
  • 4Number of paying customers with Annualized Revenue greater than $100,000 increased to 4,416.
  • 5Gross margin decreased to 71% from 76% year-over-year, primarily due to increased cost of revenue.
  • 6Cloudflare announced a plan to reduce its workforce by approximately 20% to accelerate its evolution to an agentic AI-first operating model, with estimated restructuring charges between $140 million and $150 million.

Frequently Asked Questions

Cloudflare reported revenue of $639.8 million, a 34% increase year-over-year. The company incurred a net loss of $22.9 million for the quarter. Despite the loss, key metrics like dollar-based net retention rate (118%) and the number of large paying customers (4,416) show continued business expansion and customer loyalty.

Cloudflare announced a strategic shift to an agentic AI-first operating model, which includes a workforce reduction of approximately 20%. This move is intended to accelerate their evolution and potentially improve efficiency. However, it will result in restructuring charges of $140-$150 million, primarily in Q2 2026. Investors will be watching how effectively this transition is managed and its impact on future financial performance.

Cloudflare maintains a strong liquidity position with $932.2 million in cash and cash equivalents and $3.2 billion in available-for-sale securities as of March 31, 2026. The company also has a $400 million revolving credit facility available. While they continue to invest heavily and report net losses, their substantial cash reserves and investments provide a solid financial footing.

Revenue growth is driven by acquiring new paying customers and expanding relationships with existing customers. Specifically, the increase in paying customers with annualized revenue over $100,000 and a strong dollar-based net retention rate of 118% highlight the company's success in both customer acquisition and upselling to its existing client base.