Cloudflare Raises Outlook as Revenue Growth Accelerates
Second-quarter revenue reached $696.1 million, topping the prior forecast by as much as $32.1 million.
Cloudflare Inc. (NET), the connectivity-cloud provider, raised its full-year outlook after second-quarter revenue growth accelerated to 36% from 34% in each of the previous two quarters.
The results marked a pickup in Cloudflare’s top-line trajectory, accompanied by current remaining performance obligations growth of 35%, up from 34% in each of the preceding two quarters.
Revenue rose 36% from a year earlier and increased 8.8% sequentially. Non-GAAP net income climbed to $107.8 million, or $0.29 a share, from $75.1 million, or $0.21 a share, a year earlier. GAAP net loss widened to $170.0 million, or $0.48 a share, from $50.4 million, or $0.15 a share.
Profitability improved from the first quarter on an adjusted basis. Non-GAAP operating income increased to $96.1 million from $73.1 million, while the margin expanded to 13.8% from 11.4%. Non-GAAP gross margin edged up to 73.1% from 72.8%, though it remained below 76.3% a year earlier.
Cash generation weakened sequentially. Free cash flow fell to $56.4 million, or 8% of revenue, from $84.1 million and 13% in the first quarter, while operating cash flow declined to $117.6 million from $158.3 million. Both measures remained above their year-earlier levels.
Cloudflare now expects full-year revenue of $2.864 billion to $2.870 billion, up from its prior range of $2.805 billion to $2.813 billion. It projects non-GAAP operating income of $443 million to $445 million and adjusted earnings of $1.25 to $1.26 a share, raising both forecasts. Third-quarter revenue guidance of $736 million to $737 million implies sequential growth of about 5.7% to 5.9%.
The company recorded $150.7 million of restructuring and other charges tied to a plan announced in the first quarter to reduce its workforce by about 1,100 people. The charge pushed the GAAP operating loss to $205.7 million, or 29.6% of revenue, leaving the raised outlook alongside the continuing cost of that overhaul.