NYSE:NET
Cloudflare, Inc.
A leading cybersecurity and performance infrastructure provider enabling global enterprises with edge security, zero trust access, and internet analytics services.
Key Metrics
Investment Thesis
Bull Case
Cloudflare is well-positioned to capitalize on the growing demand for comprehensive security and performance solutions as enterprises accelerate their cloud migration and digital transformation initiatives. The company's unique architecture that combines security, speed, and observability creates a sticky product suite that is difficult for customers to replace once integrated into their infrastructure stack. If management can successfully convert its current user base into higher-tier subscription plans or expand its enterprise penetration rate, the path to profitability could accelerate significantly.
Bear Case
The company faces an existential threat from hyperscalers who are increasingly bundling similar security and CDN capabilities directly into their cloud ecosystems, potentially eroding Cloudflare's standalone market share. Persistent net losses of over $100M combined with massive capital expenditures for infrastructure expansion may continue to weigh on shareholder returns without a clear timeline for consistent profitability. Additionally, the current macroeconomic environment could lead enterprises to cut spending on non-essential security and performance tools if they perceive immediate cost pressures.
About Cloudflare, Inc.
Cloudflare Inc. provides a comprehensive suite of edge security solutions, performance optimization tools, and internet analytics services to enterprises and developers globally. The company operates primarily through its network of distributed servers that mitigate threats like DDoS attacks while caching content to accelerate website loading speeds. Key products include Cloudflare Zero Trust for identity management, Stream for video delivery, and the core platform offering DNS and WAF capabilities.
Analysis
Management Discussion
While Cloudflare demonstrated strong top-line growth with revenue reaching $2.17B in 2025, representing a significant increase from previous years, the company continues to report net losses which widened slightly compared to the prior period. This reflects substantial investments in research and development totaling $512.5M and marketing expenses of nearly $921M aimed at expanding market share against aggressive competitors. Despite these strategic investments and high cash burn relative to operating income, the firm maintains a healthy liquidity position with over $943M in cash equivalents.
Industry Overview
The internet infrastructure and cybersecurity sector is experiencing rapid consolidation as major cloud providers attempt to capture more value from their existing enterprise relationships. Companies in this space must continuously innovate to stay ahead of evolving threat landscapes while managing complex global networks that serve billions of requests daily. Market dynamics favor platforms that can offer integrated solutions covering security, speed, and analytics rather than single-function point products.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Revenue | $975.2M | $1.30B | $1.67B | $2.17B |
| Cost of Revenue | $232.6M | $307.0M | $378.7M | $552.5M |
| Gross Profit | $742.6M | $989.7M | $1.29B | $1.62B |
| Operating Expenses | $943.8M | $1.18B | $1.45B | $1.82B |
| Operating Income | $-201.2M | $-185.5M | $-154.8M | $-207.2M |
| R&D | $298.3M | $358.1M | $421.4M | $512.5M |
| G&A | $179.8M | $218.0M | $278.5M | $389.3M |
| Marketing | $465.8M | $599.1M | $745.8M | $920.8M |
| Stock-Based Comp | $202.8M | $274.0M | $338.5M | $451.5M |
| D&A | $102.3M | $135.8M | $127.7M | $189.7M |
| Depreciation | $84.8M | $113.4M | $109.9M | $167.5M |
| Amortization | $15.2M | $20.0M | $12.7M | $15.0M |
| Other OpEx | $0 | $0 | $0 | $0 |
| Non-Operating Income | $10.5M | $7.6M | $83.9M | $114.5M |
| Interest Expense | $5.0M | $5.9M | — | — |
| Pre-Tax Income | $-190.7M | $-177.9M | $-70.9M | $-92.7M |
| Income Tax | $2.6M | $6.1M | $7.9M | $9.6M |
| Continuing Ops | $-193.4M | $-183.9M | $-78.8M | $-102.3M |
| Discontinued Ops | $0 | $0 | $0 | $0 |
| Net Income | $-193.4M | $-183.9M | $-78.8M | $-102.3M |
| Minority Interest | $0 | $0 | $0 | $0 |
| Net to Common | $-193.4M | $-183.9M | $-78.8M | $-102.3M |
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Current Assets | $1.89B | $1.98B | $2.27B | $4.64B |
| Cash & Equivalents | $204.2M | $86.9M | $147.7M | $943.5M |
| Accounts Receivable | $148.5M | $248.3M | $316.8M | $382.5M |
| Prepaid Expenses | $70.6M | $47.5M | $75.5M | $128.2M |
| Other Current Assets | $1.46B | $1.60B | $1.73B | $3.19B |
| Long-Term Assets | $700.0M | $776.7M | $1.03B | $1.39B |
| PP&E (Net) | $286.6M | $322.8M | $467.4M | $618.7M |
| Goodwill | $148.0M | $148.0M | $181.1M | $226.6M |
| Operating Leases | $132.4M | $138.6M | $168.4M | $237.6M |
| Other LT Assets | $133.0M | $167.3M | $215.3M | $308.5M |
| Total Assets | $2.59B | $2.76B | $3.30B | $6.04B |
| Current Liabilities | $397.9M | $567.1M | $793.7M | $2.35B |
| Accounts Payable | $35.6M | $53.7M | $105.8M | $84.1M |
| Current Leases | $33.3M | $38.4M | $47.6M | $70.9M |
| Deferred Revenue | $218.6M | $347.6M | $477.8M | $684.2M |
| Other Current Liab | $110.3M | $127.4M | $162.5M | $1.51B |
| Long-Term Liabilities | $1.57B | $1.43B | $1.46B | $2.23B |
| LT Operating Leases | $107.6M | $113.5M | $128.3M | $182.0M |
| Other LT Liab | $1.45B | $1.30B | $1.31B | $2.00B |
| Total Liabilities | $1.96B | $2.00B | $2.25B | $4.58B |
| Shareholders' Equity | $624.0M | $763.0M | $1.05B | $1.46B |
| Paid-In Capital | $1.48B | $1.78B | $2.15B | $2.65B |
| Retained Earnings | $-839.9M | $-1.02B | $-1.10B | $-1.20B |
| AOCI | $-11.9M | $2.0M | $-4.3M | $12.3M |
| Total L&E | $2.59B | $2.76B | $3.30B | $6.04B |
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Net Income (CFO) | $-193.4M | $-183.9M | $-78.8M | $-102.3M |
| Non-Cash Adjustments | $163.3M | $127.1M | $155.9M | $273.4M |
| Working Capital Changes | $153.6M | $311.2M | $303.3M | $431.9M |
| Cash from Operations | $123.6M | $254.4M | $380.4M | $603.1M |
| Capital Expenditures | $143.6M | $114.4M | $185.0M | $315.6M |
| Cash from Investing | $-235.7M | $-186.2M | $-330.2M | $-1.81B |
| Share Buybacks | $3.0K | $34.0K | $0 | $0 |
| Cash from Financing | $6.3M | $-192.2M | $12.8M | $2.00B |
| FX Effect | $0 | $0 | $0 | $0 |
| Net Change in Cash | $-105.8M | $-124.0M | $63.0M | $800.1M |
| Beginning Cash | $321.0M | $215.2M | $91.2M | $154.2M |
| Ending Cash | $215.2M | $91.2M | $154.2M | $954.4M |
Frequently Asked Questions
How does Cloudflare, Inc. make money?
Core Platform Services delivering foundational security and reliability features such as DDoS mitigation and CDN caching; Zero Trust Access solutions providing identity-centric security for cloud applications; Stream platform offering video delivery and monetization capabilities; and Network Intelligence providing data-driven insights into internet traffic and threats.
What are the main risks for NET?
Intense competition from hyperscalers like AWS, Google, and Azure who offer bundled security and CDN services at lower prices; Potential margin compression if the company must discount pricing to defend market share against large cloud providers; Reliance on recurring subscription revenue model which requires continuous innovation to maintain growth amidst slowing digital ad spend; Cybersecurity breaches or service outages could severely damage reputation given the trust-sensitive nature of their core products.
What is NET's competitive advantage?
Proprietary global edge network of over 350,000 locations enabling ultra-low latency content delivery and threat mitigation closer to the user; Strong developer ecosystem with a vast API-first product suite that encourages organic adoption and stickiness among engineering teams; High switching costs for enterprises integrating security and performance layers across their entire digital infrastructure.
Related Companies
Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.