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.
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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: $68.92 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Cloudflare’s Q4 Earnings Call
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Matt Hedberg (RBC): Asked how AI agents and increased Internet traffic are impacting Cloudflare’s business model and capital intensity. CEO Matthew Prince explained that Cloudflare’s efficiency-oriented approach allows it to deliver AI workloads at lower infrastructure cost compared to hyperscalers, stating, “We’re in the business of getting work done, not just renting machines.”
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Keith Weiss (Morgan Stanley): Inquired about the integration of recent acquisitions like Humenated and ASTRO into Cloudflare’s platform and their role in shaping the future business model of the Internet. Prince described these teams as essential to inventing new monetization models and supporting developer innovation in web infrastructure.
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Jonathan Ho (William Blair): Sought examples of how enterprises are leveraging Cloudflare Workers for AI projects and why they favor Cloudflare over competitors. Prince highlighted rapid prototyping, secure sandboxing, and flexible scaling as key differentiators driving adoption among both large enterprises and startups.
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Fatima Boolani (Citi): Asked about the growing adoption of the “pool of funds” contract model and how increased variable revenue affects forecasting. CFO Thomas Seifert confirmed that while these contracts deepen customer engagement, they introduce quarter-to-quarter volatility, particularly as AI workloads scale.
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Shrenik Kotauri (Robert Baird): Focused on Cloudflare’s role as a neutral broker in AI content marketplaces, especially regarding new tools for publishers to control and monetize their data. Prince emphasized positive feedback from both content creators and AI companies, positioning Cloudflare as a trusted intermediary.
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 $195.85, up from $179.98 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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