Core Viewpoint - Cloudflare is expected to report second-quarter 2025 results with anticipated revenues between $500 million and $501 million, reflecting a year-over-year growth of 24.87% [1][8] Revenue Expectations - The Zacks Consensus Estimate for Cloudflare's second-quarter revenues is $500.7 million [1] - The company expects non-GAAP earnings of 18 cents per share, which is a decline of 10% from the same quarter last year [2] Earnings Performance - Cloudflare has beaten the Zacks Consensus Estimate in three of the last four quarters, with an average surprise of 14.88% [3] Factors Influencing Q2 Results - Transition from traditional cybersecurity solutions to a zero-trust approach is expected to benefit Cloudflare's performance [6] - The company has seen a rise in high-value contracts and aggressive global expansion, with approximately 50% of its 2024 revenues generated outside the United States [7][8] - The addition of around 13,105 new paying customers in Q1 2025 has brought the total to approximately 250,819, contributing to revenue growth [8] Competitive Landscape - Cloudflare faces intense competition from larger players like Akamai Technologies and Amazon Web Services, as well as from Palo Alto Networks in the cybersecurity space [15][16] - The market for web infrastructure and security services is becoming increasingly competitive, with new entrants and niche players emerging [15] Investment Considerations - Cloudflare's delayed revenue recognition due to large funding deals may create near-term headwinds for metrics like Dollar-Based Net Retention, which remained flat at 111% in Q1 2025 [14] - The company has invested heavily in enhancing its sales and marketing capabilities, which has negatively impacted operating margins [18] Stock Performance and Valuation - Year-to-date, Cloudflare's shares have surged 84.2%, outperforming the Zacks Internet - Software industry's growth of 17.4% [11] - The stock is trading at a premium with a forward 12-month P/S of 28.58X compared to the industry's 5.82X, indicating a stretched valuation [12]

Core Viewpoint - Cloudflare is expected to report strong revenue growth for Q1 2025, with anticipated revenues between $468 million and $469 million, reflecting a year-over-year increase of 23.8% [1][2] Financial Performance - The company expects non-GAAP earnings of 16 cents per share for Q1 2025, with the Zacks Consensus Estimate also at 16 cents, indicating no change from the previous year [2] - Cloudflare has consistently beaten earnings estimates in the past four quarters, with an average surprise of 20.7% [4] Customer Growth and Market Trends - The first-quarter performance is likely to benefit from the shift towards zero-trust cybersecurity solutions and the hybrid working trend, which necessitates enhanced network security [7] - Cloudflare added approximately 16,174 new paying customers in Q4 2024, bringing the total to around 237,714, and added 232 new large customers, totaling 3,497 [8][9] Competitive Landscape - The market for web infrastructure and security services is highly competitive, with established players like Akamai, Fastly, and Amazon Web Services competing for market share [18][20] - Cloudflare is focusing on AI and expanding its Zero Trust security offerings, positioning itself for long-term growth potential [21] Valuation and Investment Considerations - Cloudflare's shares have increased by 67.8% over the past year, outperforming the S&P 500 index's growth of 10% [11] - The company is currently trading at a forward 12-month price-to-sales ratio of 18.86X, significantly higher than the industry average of 5.12X, indicating a stretched valuation [14] - Despite strong growth prospects, the current overvaluation raises concerns for investors, suggesting a hold position for the stock [23]

Core Viewpoint - Cloudflare Inc. (NET) has shown strong performance with a 7.3% increase in the past month, significantly outperforming the Zacks Internet – Software industry's growth of 0.8, raising questions about whether investors should hold the stock now [1]. Group 1: Growth Drivers - Cloudflare is focusing on AI and expanding its Zero Trust security offerings, positioning itself for strong long-term growth potential [4]. - The company secured a three-year Secure Access Service Edge contract worth $4 million with a major U.S. investment firm, enhancing its position in the enterprise security space [5]. - Cloudflare's AI offerings, including Workers AI and AI Gateway platforms, are gaining traction, optimizing performance and security for AI workloads [5]. - The company's AI solutions deliver up to 10 times price performance improvements over traditional hyperscalers, making it a critical infrastructure provider as AI adoption accelerates [6]. Group 2: Financial Performance - Cloudflare's go-to-market strategy has improved sales execution, with significant customer conversions in the fourth quarter, where 80% of new sales hires focused on enterprise clients [7]. - Notable customer wins include a $20 million five-year contract with a Fortune 100 technology firm and a $13.5 million deal with a leading AI company, highlighting growing enterprise traction [8]. - The company reported an operating income of $67.2 million in the fourth quarter, up 69% year over year, with an operating margin expanding 360 basis points to 14.6%, reflecting improved operational efficiency [9]. - For 2025, Cloudflare forecasts non-GAAP earnings per share between 79 cents and 80 cents, indicating year-over-year growth of 5.33% [10]. Group 3: Competitive Landscape - The market for web infrastructure and security services is highly competitive, with established players like Akamai Technologies, Fastly, and Amazon Web Services vying for market share [11]. - Akamai offers a range of infrastructure and security services, while Fastly provides solutions like Compute@Edge and a strong security portfolio [12]. - Amazon offers various services including Amazon CloudFront and security solutions, with new entrants and niche players adding to competitive pressure [13]. Group 4: Valuation Concerns - Cloudflare is currently trading at a forward sales multiple of 18.39X, compared to the Internet - Software industry's valuation of 4.86X, indicating overvaluation [14]. Group 5: Investment Recommendation - Despite strong growth prospects, Cloudflare's current overvaluation poses concerns for investors, suggesting a hold position for now [17]. - The company carries a Zacks Rank 3 (Hold) at present, indicating a prudent move for patient investors [18].