Cloudflare, Inc. (NET)

Cloudflare reported second-quarter 2026 revenue of $696.1 million on 6 August, up 36 percent from a year earlier 1. It had a GAAP net loss of $170.0 million against $50.4 million a year before, while its non-GAAP income from operations was $96.1 million 1.

The quarter also carried the cost of a plan announced on 7 May to cut about 20 percent of the workforce and move to what the company calls an agentic AI-first operating model 5. The company estimates the plan's charges at up to $165 million and expects to finish it by 30 September 2026 2.

The larger open question is in court, where on 16 October 2026 a Delaware Chancery judge temporarily blocked the company's plan to replace its dual-class stock with a three-class structure, Bloomberg Law reported 78.

The company said in its August quarterly report that it had expected to carry out the changes as early as September 2026, and that it believes the stockholder claims against them are without merit 2.

Cloudflare was incorporated in Delaware in July 2009 and is based in San Francisco 3. Its pitch is that one network in the cloud can replace the hardware boxes from different vendors that companies once strung together 3.

Annual revenue grew from $1.30 billion in 2023 to $1.67 billion in 2024 and $2.17 billion in 2025 3. The company says the 2025 rise of 30 percent came from new paying customers, up 40 percent in the year, and from existing customers spending more 3.

Paying customers numbered 332,466 at the year's end, up from 237,714 a year earlier 3. Those paying more than $100,000 a year grew from 2,756 to 4,298 over three years 3. Dollar-based net retention, the growth in revenue from the same customers over four quarters, was 120 percent 3.

Gross margin, the share of revenue left after the cost of running the network, slipped from 77 percent to 75 percent in 2025 3. Cost of revenue rose 46 percent, mainly on third-party technology services, co-location and bandwidth, and server depreciation 3.

The company still lost money, with a loss from operations of $207.2 million and a net loss of $102.3 million for the year 3. Interest income of $131.2 million, earned on its cash and securities, narrowed the gap 3.

The business did generate cash 3. Free cash flow, cash from operations less spending on equipment and software, was $260.6 million against $166.9 million a year earlier, or 12 percent of revenue 3. At year end it held $3,157.7 million in available-for-sale securities beside $943.5 million in cash and equivalents 3.

It also borrowed through convertible notes, debt that can turn into shares: in June 2025 it issued $2.00 billion of 0 percent notes due 2030 and received net proceeds of $1.97 billion 3.

It bought Kivera, a maker of cloud security, data protection and compliance technology, on 7 October 2024 for $28.0 million 3. It bought Replicate, an AI platform that lets developers run models, on 1 December 2025 for $57.4 million in cash consideration 2.

The company launched a tool for what it calls pay per crawl, which lets website owners choose whether AI crawlers may reach their material and set a price for access, Reuters reported 10. The company's annual report calls these efforts newly announced 3.

First-quarter revenue was $639.8 million, up 34 percent, ITPro reported, and in May the company said it would cut about 1,100 jobs, around 20 percent of its staff 9. Its chief executive and president wrote that the actions were not a cost-cutting exercise 9.

What the company sells

The annual report groups the products into four sets: application services, a secure access service edge platform with Zero Trust security, developer tools for serverless and AI applications, and consumer offerings 3.

The company's network spans more than 330 cities in over 125 countries and interconnects with over 13,000 networks 3. Its own wording is that the network runs every service on every server in every city 3.

Application services and security

This set protects and speeds up websites and interfaces 3. The Web Application Firewall blocks common attacks such as SQL injection, and Bot Management detects and manages harmful automated traffic 3.

It also covers identifying, blocking and controlling AI crawlers and AI agents, which the company calls a growing concern for content creators and website operators 3.

Zero Trust and network security

The Cloudflare One Client (WARP) sends corporate device traffic through the network and enforces security policies anywhere 3. Remote Browser Isolation runs a customer's browsers in the cloud instead of on the device 3.

Other tools include Cloud Email Security against phishing, a Cloud Access Security Broker for software-as-a-service apps, and Data Loss Prevention that inspects web traffic for sensitive data 3.

Developer platform and AI

Cloudflare Workers lets developers run code on the network without managing servers, and Workers AI runs machine learning models on serverless GPUs 3. R2 Object Storage offers storage without egress fees 3.

Replicate, bought in December 2025, adds a platform for deploying and running AI models, and VoidZero, bought on 1 June 2026 for $164.2 million, brought a high-performance toolchain 2.

Customers and where revenue comes from

Customers paying more than $100,000 a year numbered 4,698 on 30 June 2026, up from 3,712 a year before 2. Contracted revenue not yet recognized was $2,732.0 million, with 64 percent expected within 12 months 2.

By billing address, the United States supplied 51 percent of second-quarter revenue, or $354.4 million 2. For all of 2025 the split was the United States 49 percent, with Europe, the Middle East and Africa next 3.

People, rivals and problems

Matthew Prince is chief executive and co-chair of the board, and Michelle Zatlyn is president and co-chair; both have been directors since 2009 6. At the end of 2025 the company had 5,156 full-time employees, 2,452 of them outside the United States 3.

The annual report names three groups of rivals: on-premises network hardware vendors, point-solution vendors for single tasks such as security or content delivery, and a subset of services from public cloud vendors 3.

The workforce cut touched about 20 percent of staff, and the company's own risk list warns that the AI-first model may not bring the benefits it expects in the time it expects 52. Its network in China depends on a relationship with JD Cloud 2.

Eight stockholder complaints over the capital plan had been filed by 5 August 2026, seven of them consolidated into one action alleging breach of fiduciary duty 2. The company and the board call the claims without merit 2.

The umbrella, in words

It owns outright Kivera (bought 7 October 2024), Replicate (1 December 2025) and VoidZero (1 June 2026), each acquired as all of the outstanding shares 32.

Cloudflare leases all its facilities and owns no real property, including about 112,000 square feet at its San Francisco headquarters 3. Other offices include Austin, New York, London, Lisbon and Singapore 3.

Control sits with the founders through Class B shares, which carry 10 votes each against one for Class A 3. At the end of 2025 the co-founders together held about 50.5 percent of the voting power 3.

As of 21 July 2026, 322,618,775 Class A shares and 33,460,940 Class B shares were outstanding 2. The Class A stock is listed on the New York Stock Exchange under NET 1.

For the third quarter of 2026 the company expects revenue of $736.0 million to $737.0 million and non-GAAP income from operations of $129.0 million to $130.0 million 1.

For the full year 2026 it expects revenue of $2,864.0 million to $2,870.0 million and non-GAAP net income of $1.25 to $1.26 per share, on about 374 million shares 1. It adds that actual results may differ materially 1.

On the workforce plan, the company expects to recognize the remaining charges in the third quarter of 2026 and to substantially complete the plan by 30 September 2026 2.

On the capital plan, the company said in August it anticipated implementing the changes as early as September 2026, subject to the litigation 2. A Delaware judge blocked the plan temporarily on 16 October 2026, Bloomberg Law reported 7.

The plan would reconstitute each Class A and Class B share into one of that class plus one non-voting Class C share, which the company expects to list on the New York Stock Exchange 6. Stockholders approved the Class C stock at the 2026 annual meeting 11.

The updated equity plan and employee stock purchase plan, approved at that meeting, take effect only when the Class C Split takes effect 11.

On debt, the company issued $2.50 billion of 0 percent convertible notes on 13 August 2026 4. They mature on 15 August 2031 and may not be redeemed before 20 August 2029 except in a cleanup redemption 4. The company intends to use the remainder of the proceeds for general corporate purposes, which may include potential acquisitions 4.

On AI and the web, chief strategy officer Stephanie Cohen said of the tools that let publishers control crawlers: "This is just the beginning of a new model for the internet" 10.

Its San Francisco headquarters leases at 101 and 111 Townsend Street expire in October 2027, and the lease at 634 Second Street in December 2027 3.