Cloudflare Reports 34% Revenue Growth to $639.8 Million, Plans AI-First Transition

Cloudflare, Inc. reported significant financial growth in its latest quarterly results, with revenue reaching $639.8 million for the three months ended March 31, 2026, a 34% increase from $479.1 million in the same period last year. The company’s gross profit also rose to $455.6 million, resulting in a gross margin of 71%, down from 76% in the prior year. Despite the revenue growth, Cloudflare recorded a net loss of $22.9 million, an improvement from a net loss of $38.5 million in the previous year. The loss per share attributable to common stockholders was $0.07, compared to $0.11 in the same quarter of 2025.

The increase in revenue was primarily driven by the addition of new paying customers, particularly those generating over $100,000 in annualized revenue, which grew to 4,416 from 3,527 year-over-year. The company also reported a dollar-based net retention rate of 118%, indicating strong expansion within its existing customer base. However, the cost of revenue surged by 59% to $184.2 million, largely due to increased expenses related to third-party technology services, co-location facilities, and employee-related costs.

In terms of strategic developments, Cloudflare has been actively investing in its workforce and product offerings. The company announced a plan to transition to an AI-first operating model, which includes a workforce reduction of approximately 20%. This restructuring is expected to incur charges between $140 million and $150 million, primarily related to severance and employee benefits. Additionally, Cloudflare has made acquisitions, including the purchase of Replicate, an AI platform, for $57.4 million, which is anticipated to enhance its service offerings.

Operationally, Cloudflare's total assets increased to $6.2 billion as of March 31, 2026, up from $6.0 billion at the end of 2025. The company reported cash and cash equivalents of $932.2 million, alongside available-for-sale securities totaling $3.2 billion. The total number of employees rose by 29% in the sales and marketing sector, reflecting the company's commitment to expanding its market presence. Cloudflare's international revenue remained stable, accounting for 51% of total revenue, indicating a consistent global demand for its services.

Looking ahead, Cloudflare anticipates continued revenue growth driven by its expanding customer base and product offerings. However, the company acknowledges potential challenges from macroeconomic conditions, including inflation and geopolitical tensions, which could impact customer spending and overall demand for its services. The management remains focused on executing its strategic initiatives while navigating these uncertainties, aiming to achieve profitability in the long term.