Financial Data and Key Metrics Changes - The company achieved revenue of $614.5 million in Q4 2025, representing a 34% year-over-year increase [6][22] - The number of customers paying more than $100,000 per year increased by 23% year-over-year, totaling 4,298 [6][23] - The dollar-based net retention rate was 120%, up 1% quarter-over-quarter and 9% year-over-year [6][24] - Gross margin was 74.9%, slightly below the long-term target range of 75%-77% [6][24] - Operating profit was $89.6 million, with an operating margin of 14.6%, consistent year-over-year [7][26] - Free cash flow reached $99.4 million, or 16% of revenue, compared to 10% in the same period last year [27] Business Line Data and Key Metrics Changes - Revenue from large customers contributed 73% of total revenue in Q4, up from 69% in the same quarter last year [22][24] - New Annual Contract Value (ACV) grew nearly 50% year-over-year, marking a record quarter in absolute ACV dollars [8] - The company added a record number of customers spending over $1 million per year for the fifth consecutive quarter [8] Market Data and Key Metrics Changes - The U.S. represented 49% of revenue, increasing by 31% year-over-year, while EMEA and APAC represented 27% and 16% of revenue, increasing by 31% and 50% year-over-year, respectively [22] - The company ended the year with 269 customers spending over $1 million, a 55% increase year-over-year [24] Company Strategy and Development Direction - The company is transitioning from product-led growth to true enterprise sales, with a focus on enhancing its go-to-market strategy [8] - The management highlighted a shift towards AI-driven demand for Cloudflare services, positioning the company as a critical infrastructure provider for the emerging Agentic Internet [17][20] - The company aims to define the future business model of the internet, moving away from traditional advertising and subscription models [43][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the evolving tech landscape, particularly with the rise of AI agents [34][35] - The company is focused on maintaining capital efficiency while investing in growth opportunities driven by increased demand for its services [37][38] - Management anticipates continued strong performance in 2026, with revenue guidance of $2.785 billion to $2.795 billion, representing a 28%-29% year-over-year increase [30] Other Important Information - The company reported a total of 332,000 paying customers, with a record addition of nearly 37,000 customers sequentially [23] - Remaining performance obligations (RPO) reached $2.496 billion, a 48% year-over-year increase [28] Q&A Session Summary Question: Impact of AI agents on Cloudflare - Management believes the company is well-positioned to benefit from the rise of AI agents, which are driving increased demand for Cloudflare's services [34][35] Question: Evolution of internet traffic and new acquisitions - Management discussed the integration of new acquisitions like Human Native and Astro, which are aimed at defining future business models and enhancing developer capabilities [42][43] Question: Large deal pipeline and engagement - Management noted a strong pipeline for large deals, emphasizing the importance of deep customer relationships and the ability to provide scalable, cost-effective solutions [58][59] Question: Pool of funds contracting and revenue variability - Management indicated that pool of funds contracts represent customer trust and are expected to grow, although they may introduce some revenue variability [63][66] Question: Increased demand for core application services - Management highlighted a significant uptick in demand for core application services, particularly from AI companies needing robust security and scalability [70][75]

Cloudflare (NYSE:NET) Q4 2025 Earnings call February 10, 2026 05:00 PM ET Speaker7Hello and welcome to the Cloudflare fourth quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, please press star 1 on your telephone keypad. I would now like to turn the conference over to Phil Winslow. You may begin.Speaker8Thank you for joining us today to ...

Core Insights - Cloudflare (NET) has developed a robust product portfolio with over 55 revenue-generating products, enhancing its annual contract value and net retention rate [1][11] - The company serves approximately 80% of leading AI firms globally, leveraging its low-latency edge network to gain a competitive edge [2][11] - Cloudflare's security solutions, including Magic Transit and Zero Trust, are gaining traction, particularly in response to increased AI scraping and bot activity [3] Product and Market Position - Cloudflare's diverse offerings in cloud-based security, content delivery networks (CDN), and developer solutions allow it to provide comprehensive end-to-end solutions for enterprises [6] - The company is rapidly scaling its cloud-native strategy, positioning itself favorably against competitors like Akamai Technologies and Zscaler [7][8] - Cloudflare's bundled security tools facilitate easier adoption and higher net retention rates, differentiating it from pure cybersecurity competitors [9] Strategic Collaborations - Cloudflare is partnering with industry leaders such as Oracle, Alphabet, Coinbase, Visa, Mastercard, and American Express to enhance its service offerings [4] - Collaborations with Oracle focus on hybrid and multi-cloud workloads, while partnerships with Alphabet aim at developing post-quantum cryptography standards [4] Growth Potential - The combination of AI, security, multi-cloud networking, and enterprise-scale solutions creates a strong growth engine for Cloudflare, with a projected revenue growth of 28% year-over-year for 2025 [5] - The Zacks Consensus Estimate for Cloudflare's 2025 earnings indicates a year-over-year growth of 21.3%, with recent upward revisions [15] Financial Performance - Cloudflare's stock has surged 76.6% over the past year, significantly outperforming the Zacks Internet – Software industry's growth of 0.9% [10] - The company currently trades at a forward price-to-sales ratio of 26.37X, which is substantially higher than the industry average of 4.82X [13]

Core Insights - Cloudflare Inc. (NET) shares have increased by 85.1% over the past year, significantly outperforming the Zacks Internet – Software industry's growth of 4.5% [1] - The current performance raises questions for investors regarding whether to buy, sell, or hold Cloudflare stock [1] Group 1: AI and Security Growth - Cloudflare's edge network and security capabilities provide a low-latency network at an affordable cost, giving it a competitive edge among AI companies, serving approximately 80% of leading AI firms globally [4] - The company has over 55 revenue-generating products, which facilitate frictionless adoption and contribute to its annual contract value and net retention rate [5] - Cloudflare's security solutions, including Magic Transit, Zero Trust, and SASE, are gaining traction, with increased monetization opportunities from AI-related products like AI Crawl Control and Bot Management [6] Group 2: Long-term Growth Potential - The combination of AI, security, multi-cloud networking, and enterprise scale creates a robust growth engine for Cloudflare, with a Zacks Consensus Estimate projecting a 28% year-over-year revenue growth for 2025 [7] - Recent upward revisions in earnings estimates indicate positive sentiment, with a penny increase in the past week [7] Group 3: Strategic Partnerships - Cloudflare has strengthened collaborations with major companies such as Oracle, Alphabet, and Coinbase, enhancing its capabilities in cryptography and payment protocols [8][11] - The partnership with Oracle focuses on hybrid and multi-cloud workloads, while collaboration with Alphabet aims at post-quantum cryptography standards [10] - These strategic alliances position Cloudflare as a key player in shaping the future of the Internet and AI [11] Group 4: Market Position and Recommendations - Cloudflare's shares are currently trading above the 200-day moving average, indicating a bullish trend [14] - Given the company's strong performance in AI, security, enterprise adoption, and partnerships, it is recommended that investors consider buying NET stock now [15]