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Cloudflare Surges After Topping Q2 Expectations

Stock Markets Aug 05, 2022 11:44AM ET
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© Reuters. Cloudflare (NET) Surges After Topping Q2 Expectations

By Sam Boughedda

Cloudflare (NYSE:NET) surged 24% after the company reported earnings aftermarket Thursday, topping earnings and revenue estimates.

The San Francisco, California-based company, reported second quarter earnings of $0.00, $0.01 better than the analyst estimate of a loss of $0.01. Revenue for the quarter came in at $234.5 million versus the consensus estimate of $227.33 million. Revenue grew 54% year-over-year.

The company said it experienced robust large customer growth during the quarter, with a record addition of 212 large customers, bringing its number of large customers to 1,749.

"We delivered another strong quarter, with revenue growth up 54% year-over-year, driven by strength in our large customers, and a record number of large customer additions. Large customers now represent 60% of our revenue, and they are leaning forward to hear how Cloudflare can save them money and reduce IT complexity, all while increasing their security, performance, and reliability," said Matthew Prince, co-founder & CEO of Cloudflare.

Looking ahead, Cloudfare sees full-year 2022 adjusted earnings between $0.03 and $0.04, versus the consensus of $0.03, with revenue expectations above estimates between $968 million and $972 million, versus the consensus of $958.4 million. Third quarter revenue is expected to be between $250 million and $251 million.

Following the report, a Mizuho analyst maintained the firm's Neutral rating on the stock but raised their price target to $85 from $76 per share.

"NET reported a much better than feared 2Q, led by total revenue growth of 54% Y/Y that meaningfully beat our/the Street's +49% growth forecast. NET also believes its sales cycles and pipeline growth have at least stabilized in 2Q," said the analyst. "The stock is trading up ~20% AH on the clean print and more favorable commentary (although the shares had declined roughly 50% since the end of March). More broadly, we believe that NET possesses highly scalable architecture and a culture of strong innovation. That said, we believe NET's valuation somewhat meaningfully discounts strong platform growth in the future."

In addition, a BTIG analyst also maintained a Neutral rating. The analyst told investors in a note that "NET reported strong Q2 results that exceeded expectations across all key metrics and provided a better than expected growth outlook for 2022. Most notably, NET sustained 54% y/y revenue growth (inclusive of a sub-1% contribution from Area 1) in Q2 for the third consecutive quarter and beat our / street ests of 49%."

Cloudflare Surges After Topping Q2 Expectations
 

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