TLDR
- Q1 2025 revenue rose 27% to $479.1 million.
- EPS hit $0.16, net income totaled $58.4 million.
- Large customers grew 23% year-over-year.
- Gross margin stood at 77.1%, topping long-term targets.
- Full-year revenue guidance raised to over $2.09 billion.
Cloudflare (NYSE: NET) stock jumped over 6% on Friday Morning, boosted by solid Q1 2025 results.
The cloud services provider reported revenue of $479.1 million, a 27% increase from a year earlier. This marked one of Cloudflare’s strongest quarters, helping shares extend their 80.41% gain over the past year.
Net income reached $58.4 million, with diluted EPS at $0.16. Operating profit hit $56 million, reflecting an 11.7% margin. Free cash flow was strong at $52.9 million, or 11% of revenue, signaling healthy financial management.
Customer Base Expansion and Record Deals
Cloudflare continues to scale its business, ending Q1 with 3,527 customers spending over $100,000 annually. This represents a 23% year-over-year increase. Management highlighted the signing of the largest contract in company history, a deal exceeding $100 million.
The firm’s dollar-based net retention rate held steady at 111%, indicating stable spending among existing clients, though it remained flat compared to the prior quarter. Remaining performance obligations (RPO), an indicator of future revenue, rose 39% year-over-year to $1.864 billion.
$NET | Cloudflare Q1'25 Earnings Highlights
🔹 Revenue: $479.1M (Est. $469.65M) 🟢; +27% YoY
🔹 Adj. EPS: $0.16 (Est. $0.16) 🟡Guidance
🔹 FY25 Revenue: $2.09B–$2.094B (Est. $2.09B) 🟡
🔹 FY25 EPS: $0.79–$0.80 (Est. $0.82) 🔴
🔹 Q2 Revenue: $500M–$501M (Est. $500.9M) 🟡
🔹 Q2…— Wall St Engine (@wallstengine) May 8, 2025
Margins Hold Strong Amid Macro Pressures
Gross margin stood at 77.1%, above the company’s long-term target range of 75% to 77%, though it declined 240 basis points from a year earlier. Executives flagged macroeconomic volatility and longer sales cycles as challenges but maintained confidence in sustaining growth.
Cloudflare’s cash and equivalents totaled $1.9 billion, providing ample liquidity for operations and expansion. Management noted that despite pressures from evolving internet trends and AI, demand for its cybersecurity and network services remains robust.
Outlook Brightens with Raised Guidance
For Q2 2025, Cloudflare expects revenue between $500 million and $501 million, signaling 25% year-over-year growth. Full-year guidance was lifted to between $2.090 billion and $2.094 billion, also targeting 25% growth.
Cloudflare’s stock has delivered outsized returns for investors over multiple time frames. Year to date, shares are up 22.88%, sharply outperforming the S&P 500’s 3.71% decline. Over the past year, NET has surged 80.41%, compared to the index’s 8.62% gain.
Over three years, the stock climbed 133.94%, tripling the S&P 500’s 41.89% advance. In the past five years, Cloudflare shares have soared 403.87%, far ahead of the market’s 93.30% rise. These figures underscore the company’s strong growth trajectory and investor confidence. With customer momentum and elevated guidance, investors appear optimistic about continued upside.
