Here's our initial take on Cloudflare's (NET 3.80%) fiscal 2025 first-quarter financial report.
Key Metrics
| Metric | Q1 2024 | Q1 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $378.6 million | $479.1 million | +27% | Beat |
| Earnings per share (adjusted) | $0.16 | $0.16 | flat | Met |
| Large customers (> $100k) | 2,878 | 3,527 | +23% | n/a |
| Free cash flow | $35.6 million | $52.9 million | +49% | n/a |
A Major Customer Win
Cloudflare beat expectations for revenue and met expectations for adjusted earnings per share in the first quarter, with its results buoyed by the biggest customer win in the company's history. Cloudflare scored a contract worth more than $100 million, with the Workers developer platform at the center of that deal.
The number of large customers spending at least $100,000 annually rose by 23% year over year in the first quarter. Large customers accounted for 69% of Cloudflare's total revenue, up from 67% in the prior-year period. Dollar-based net retention was 111%, unchanged from the fourth quarter of 2024.
Overall revenue was up 27% to $479.1 million, while adjusted EPS was flat at $0.16. Adjusted gross margin edged lower to 77%, although that's still within the company's long-term model range. Free cash flow jumped by 49% to $52.9 million.
Cloudflare expects to generate between $2.09 billion and $2.094 billion in revenue in fiscal 2025, representing 25% growth from fiscal 2024. The company also expects to produce a non-GAAP operating margin of 13% for the year.
NYSE: NET
Key Data Points
Immediate Market Reaction
Shares of Cloudflare were up about 5% in early after-hours trading on Thursday soon after the first-quarter report was released. While the company merely matched expectations for earnings and fell a bit short of the consensus analyst estimate for fiscal 2025 revenue, Cloudflare's results were overall impressive. The stock went into the earnings report down nearly 30% from its 52-week high, so it could regain some ground on Friday.
What to Watch
Cloudflare gave no indication in its earnings release that the macroeconomic environment is having a negative impact on its business. The company's confidence may be what was moving the stock in after-hours trading, although Cloudflare is certainly exposed to a potential slowdown in IT spending. So far, though, Cloudflare appears to be having no trouble navigating an uncertain and volatile economic environment. Investors should listen to the earnings call on Thursday evening for more detail from management.
