Cloudflare (NET) Accelerates Revenue Growth as Losses Vanish William TempleOctober 31, 2025 at 12:02 AM 0 Sundry Photography / iStock Editorial via Getty Images Cloudflare (NYSE: NET) delivered a decisive earnings beat after the close Thursday, sending shares surging 8.1% to $240.
- - Cloudflare (NET) Accelerates Revenue Growth as Losses Vanish
William TempleOctober 31, 2025 at 12:02 AM
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Sundry Photography / iStock Editorial via Getty Images
Cloudflare (NYSE: NET) delivered a decisive earnings beat after the close Thursday, sending shares surging 8.1% to $240.19 in after-hours trading. Revenue accelerated for a second consecutive quarter, and the company's path to sustained profitability narrowed further. Investors rewarded the execution immediately.
Revenue Growth Accelerates Again
Cloudflare posted Q3 revenue of $562 million, beating expectations of $544.9 million and marking 30.7% year-over-year growth. What matters most: this is the second quarter in a row where growth has accelerated. In Q2, the company grew 23% year-over-year. That sequential acceleration signals demand is strengthening, not softening. Gross profit climbed 24.4% to $415.7 million, with gross margin holding steady around 74% of revenue.
CEO Matthew Prince emphasized the momentum in his remarks. "Revenue growth accelerating for the second consecutive quarter to 31 percent year-over-year," he said. "Great companies innovate and execute, and we continue to deliver on both." The tone was confident without overreach.
Profitability Inflection Underway
Non-GAAP EPS came in at $0.27, beating the $0.23 consensus estimate by 17%. More importantly, GAAP net loss narrowed dramatically to just $1.3 million from a $15.3 million loss in the prior year. That's a 91.6% improvement on the bottom line. Operating margin on a non-GAAP basis reached 15.3%, a critical threshold for a company that was burning cash just a few years ago.
Free cash flow jumped 59.6% year-over-year to $75 million, with a 13% margin on revenue. I'd watch this metric closely. It shows the company is not just growing revenue but converting it into real cash. Cash on hand stands at $4 billion, providing substantial runway for investment or shareholder returns.
Guidance Signals Confidence, Not Complacency
For Q4, management guided to revenue of $588.5 million to $589.5 million with non-GAAP EPS of $0.27. Full-year 2025 revenue guidance sits at $2.142 billion to $2.143 billion. These figures imply Q4 growth will decelerate slightly from Q3's 31%, but that's typical as the year winds down and comparisons get tougher. The consistency of EPS guidance suggests management expects operating leverage to continue.
Key Figures -
Q3 Revenue: $562M (vs. $544.9M expected); +30.7% YoY
Non-GAAP EPS: $0.27 (vs. $0.23 expected); beat by 17%
Gross Margin: 74% of revenue; stable year-over-year
Non-GAAP Operating Margin: 15.3%; expanding
GAAP Net Loss: $1.3M (vs. $15.3M loss prior year); 91.6% improvement
Free Cash Flow: $75M; +59.6% YoY; 13% margin
Cash on Hand: $4.04B
The real story here is the margin expansion. Cloudflare is proving it can grow at scale and improve profitability simultaneously. That's the inflection investors have been waiting for.
Leadership Emphasizes Execution Pace
Prince also highlighted the company's product velocity. "We're shipping capabilities at an unmatched pace," he said. "This dramatically increases the value we deliver, expands our reach, and builds the rails for the next decade of Internet growth." The message was clear: Cloudflare is not just growing faster. It's building defensible moats through relentless innovation.
Management's tone struck a balance. They're bullish on demand and their own execution but not reckless on guidance or spending. That discipline is exactly what a high-growth company needs at this valuation.
What Investors Should Watch Next
The stock is now trading near all-time highs at $240 in after-hours, well above the $210.63 analyst consensus target. That gap suggests either the market is pricing in upside the Street hasn't acknowledged yet or there's room for analyst upgrades. I'd listen on the call for any commentary on customer wins, retention rates, and how they're thinking about AI workloads. Those three factors will determine whether this acceleration sustains into 2026.
Source: "AOL Money"
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