Cloud security and performance company Cloudflare (NYSE:NET) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 33.6% year on year to $614.5 million. Guidance for next quarter’s revenue was better than expected at $620.5 million at the midpoint, 1% above analysts’ estimates. Its non-GAAP profit of $0.28 per share was in line with analysts’ consensus estimates.
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Cloudflare (NET) Q4 CY2025 Highlights:
- Revenue: $614.5 million vs analyst estimates of $590.6 million (33.6% year-on-year growth, 4.1% beat)
- Adjusted EPS: $0.28 vs analyst estimates of $0.27 (in line)
- Adjusted Operating Income: $89.6 million vs analyst estimates of $83.83 million (14.6% margin, 6.9% beat)
- Revenue Guidance for Q1 CY2026 is $620.5 million at the midpoint, above analyst estimates of $614.1 million
- Adjusted EPS guidance for the upcoming financial year 2026 is $1.12 at the midpoint, missing analyst estimates by 5.7%
- Operating Margin: -8%, in line with the same quarter last year
- Billings: $694.9 million at quarter end, up 26.8% year on year
- Market Capitalization: $63.04 billion
StockStory’s Take
Cloudflare’s fourth quarter results were met with a strong positive market reaction, as the company’s focus on enterprise sales and AI-driven demand underscored its performance. Management credited the acceleration in large customer growth and an expanding pipeline of high-value deals as key contributors to the quarter’s outperformance. CEO Matthew Prince highlighted, “We blew away our previous record for new ACV in the quarter, with strong year-over-year and quarter-over-quarter acceleration,” while emphasizing Cloudflare’s strategic positioning as a “must-have” platform for both traditional and AI-native customers.
Management’s guidance for the upcoming quarters is rooted in expectations of continued AI-driven demand and further expansion of usage-based contracts. CEO Matthew Prince stated that Cloudflare is positioned “to help define the future business model of the Internet,” citing the company’s role as a neutral broker between AI firms and content creators. CFO Thomas Seifert added that increased adoption of Cloudflare Workers and higher variable revenue from pool of funds contracts are expected to drive growth, though the team acknowledged that this also introduces greater variability in revenue forecasting going forward.
Key Insights from Management’s Remarks
Cloudflare’s leadership attributed the quarter’s performance to robust enterprise momentum, accelerated AI adoption, and a refined go-to-market strategy that expanded large customer relationships and increased multi-product usage.
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Enterprise sales acceleration: Management credited the shift from product-led growth to a true enterprise sales approach as a major driver of new annual contract value (ACV) growth, noting record productivity within the sales team and increased quota attainment. This approach led to the highest number of customers spending over $1 million annually with Cloudflare.
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AI-native customer adoption: The company highlighted multiple large contract wins with leading AI companies, including one that selected Cloudflare as its primary infrastructure provider. These customers cited Cloudflare’s unified stack, rapid product development, and neutrality as reasons for choosing the platform over hyperscalers (large cloud providers like Amazon Web Services or Microsoft Azure).
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Expansion of developer platform: Cloudflare reported strong adoption of its Workers developer platform, as both startups and large enterprises increasingly use these tools for building and scaling AI-powered applications. Management emphasized the platform’s ability to enable rapid prototyping and cost-effective scaling, which has been a differentiator against traditional hyperscalers.
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Success with usage-based contracts: The “pool of funds” contracting model, where customers commit to a pool of spend for flexible use across Cloudflare products, gained traction. Management noted this model is growing quickly, representing about 20% of new ACV in the quarter, and builds customer loyalty by accommodating unpredictable usage tied to emerging AI workloads.
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Channel and partner leverage: Cloudflare made significant progress in expanding its channel partner ecosystem, making it easier for value-added resellers and systems integrators to deploy Cloudflare’s products across complex enterprise environments. This partner-led strategy is expected to drive further penetration into verticals requiring customized solutions.
Drivers of Future Performance
Cloudflare’s outlook is shaped by ongoing AI adoption, growing variable revenue streams, and continued expansion into enterprise and partner-driven sales channels.
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AI as a growth catalyst: Management believes the shift toward AI-driven Internet traffic will increase demand for Cloudflare’s platform, as AI agents generate significantly more requests and require advanced security, scalability, and automation—benefiting both legacy services and developer products.
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Usage-based contract volatility: CFO Thomas Seifert noted that while the “pool of funds” model fosters deeper customer relationships and higher revenue potential, it also introduces more variability in quarterly revenue recognition, especially as usage patterns tied to AI workloads remain unpredictable.
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Channel expansion and enterprise focus: The company is investing in growing its channel partner ecosystem and refining its direct sales strategy, aiming for broader enterprise penetration and increased sales productivity. Management expects these go-to-market investments to enhance scalability and support new product uptake across diverse verticals.
Catalysts in Upcoming Quarters
In the coming quarters, our analysts will be closely monitoring (1) the pace of AI agent adoption and its impact on Cloudflare’s core security and developer platforms, (2) the continued ramp of “pool of funds” contracts and the effect on revenue stability, and (3) the company’s progress in scaling its channel partner network to boost enterprise penetration. Execution on new product launches and evolving monetization strategies for both AI and content marketplaces will also be critical signposts.
Cloudflare currently trades at $208.55, up from $182 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).
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