Cloud security and performance company Cloudflare (NYSE: NET) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 30.7% year on year to $562 million. Guidance for next quarter’s revenue was better than expected at $589 million at the midpoint, 1.5% above analysts’ estimates. Its non-GAAP profit of $0.27 per share was 15.4% above analysts’ consensus estimates.
Is now the time to buy Cloudflare? Find out by accessing our full research report, it’s free for active Edge members.
Cloudflare (NET) Q3 CY2025 Highlights:
- Revenue: $562 million vs analyst estimates of $544.7 million (30.7% year-on-year growth, 3.2% beat)
- Adjusted EPS: $0.27 vs analyst estimates of $0.23 (15.4% beat)
- Adjusted Operating Income: $85.94 million vs analyst estimates of $76.32 million (15.3% margin, 12.6% beat)
- Revenue Guidance for Q4 CY2025 is $589 million at the midpoint, above analyst estimates of $580 million
- Management raised its full-year Adjusted EPS guidance to $0.91 at the midpoint, a 6.4% increase
- Operating Margin: -6.7%, in line with the same quarter last year
- Free Cash Flow Margin: 13.3%, up from 6.5% in the previous quarter
- Billings: $624.4 million at quarter end, up 39.6% year on year
- Market Capitalization: $79.24 billion
Company Overview
With a massive network spanning more than 310 cities in over 120 countries, Cloudflare (NYSE: NET) provides a global network that delivers security, performance and reliability services to protect websites, applications, and corporate networks.
Revenue Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Cloudflare grew its sales at an exceptional 38.9% compounded annual growth rate. Its growth surpassed the average software company and shows its offerings resonate with customers, a great starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. Cloudflare’s annualized revenue growth of 29% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. 
This quarter, Cloudflare reported wonderful year-on-year revenue growth of 30.7%, and its $562 million of revenue exceeded Wall Street’s estimates by 3.2%. Company management is currently guiding for a 28.1% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 25.2% over the next 12 months, a deceleration versus the last two years. Still, this projection is commendable and implies the market is forecasting success for its products and services.
Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, available to you FREE via this link.
Billings
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Cloudflare’s billings punched in at $624.4 million in Q3, and over the last four quarters, its growth was fantastic as it averaged 34.2% year-on-year increases. This alternate topline metric grew faster than total sales, meaning the company collects cash upfront and then recognizes the revenue over the length of its contracts - a boost for its liquidity and future revenue prospects. 
Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
Cloudflare is very efficient at acquiring new customers, and its CAC payback period checked in at 26.9 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give Cloudflare more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments. 
Key Takeaways from Cloudflare’s Q3 Results
We were impressed by how significantly Cloudflare blew past analysts’ billings expectations this quarter. We were also glad its EPS guidance for next quarter trumped Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock traded up 4.7% to $233.01 immediately after reporting.
Cloudflare put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
