Cloudflare, the internet infrastructure and security company that sits between millions of websites and their users, reported its fastest revenue growth in nearly four years, as the rise of artificial intelligence drives demand for its network and services.
Revenue for the third quarter rose 39% to $782.5 million from $562 million a year earlier, according to the company's results announcement reported by StockTitan on November 5. Current remaining performance obligations, a measure of contracted future revenue, grew 37%.
"The third quarter was Cloudflare's best quarter ever," said co-founder and chief executive Matthew Prince. He said the company had crossed $3 billion in annualised revenue, achieved its fastest revenue growth in nearly four years and expanded profitability at the same time.
Cloudflare's shares jumped 14.57% in after-hours trading on November 5, according to StockTitan, bucking a sell-off that sent the Nasdaq down 5.5%.
The numbers
Non-GAAP operating income rose to $137.1 million, or 17.5% of revenue, from $85.9 million, or 15.3%, a year earlier, according to the results. Non-GAAP earnings per share were $0.38, compared with $0.27. On a GAAP basis, which includes stock-based compensation and other items, Cloudflare reported a net loss of $34.1 million, or $0.10 per share.
Gross margins narrowed. The non-GAAP gross margin was 72.4%, down from 75.3%, reflecting investments in network capacity, including for AI workloads.
Operating cash flow rose to $215.4 million from $167.1 million, while free cash flow was $82.1 million, or 10% of revenue. The company had $5.13 billion in cash, cash equivalents and available-for-sale securities.
Raising the outlook
Cloudflare raised its full-year revenue forecast to $2.963 billion to $2.964 billion, and expects fourth-quarter revenue of $845 million to $846 million, according to the results. It forecast full-year non-GAAP earnings per share of $1.35 and fourth-quarter non-GAAP EPS of $0.43. The company has said it expects to achieve GAAP profitability in the fourth quarter, according to KuCoin News.
What Cloudflare does
Founded in 2009, Cloudflare operates a global network spanning hundreds of cities that speeds up and protects websites, applications and networks. Its services include content delivery, protection against cyberattacks such as distributed denial-of-service (DDoS) attacks, website security, "zero trust" network access for companies and a developer platform called Workers that allows applications to run close to users.
A significant share of the world's websites use Cloudflare's services, giving it visibility into global internet traffic and making it a critical part of the internet's infrastructure.
The AI tailwind
AI has become a major driver of Cloudflare's growth. The company offers Workers AI, which allows developers to run AI models on its global network, close to users, reducing latency. As AI applications move from training, which happens in large centralised data centres, to inference, where models respond to user requests, demand for distributed computing close to users is growing.
AI agents, software that acts on behalf of users by browsing websites and completing tasks, are also generating new traffic and security challenges. Cloudflare has introduced tools to help websites manage and charge AI crawlers that scrape content for training AI models, a contentious issue for publishers.
A rare bright spot
Cloudflare's surge on November 5 contrasted with the broader market, where investors sold chip and AI infrastructure stocks on fears that political changes in the United States could slow data centre construction. Software and services companies with strong results, such as Cloudflare and JFrog, which rose about 22% after hours, were among the few winners, according to StockTitan.
The divergence suggests that investors are distinguishing between companies dependent on massive capital spending on AI infrastructure and those that benefit from AI usage with lighter capital requirements.
Competition
Cloudflare competes with content delivery and security companies such as Akamai, Fastly and Zscaler, as well as with the major cloud providers, Amazon Web Services, Microsoft Azure and Google Cloud. Its broad, integrated platform and global network give it advantages in serving a wide range of customers, from small websites to large enterprises.
The India angle
India is one of the world's largest internet markets, with hundreds of millions of users and a growing digital economy. Cloudflare operates network locations across Indian cities to serve local users. As Indian businesses and government services move online and adopt AI, demand for content delivery, security and edge computing is growing. India also has a large pool of software engineers, many of whom build applications on platforms such as Cloudflare's.
Security in the AI age
Cybersecurity remains central to Cloudflare's business. As companies adopt AI and more of their operations move online, the volume and sophistication of cyberattacks have increased. Cloudflare's network blocks large numbers of attacks every day, and its security services, including protection against DDoS attacks, bots and application vulnerabilities, are a major source of revenue.
The company's zero trust services, which secure access to corporate applications for employees working from anywhere, have also grown as companies replace traditional network security approaches.
Publishers and AI crawlers
Cloudflare has positioned itself at the centre of a debate over how AI companies use online content. Many publishers and website owners object to AI companies scraping their content to train models without permission or payment. Cloudflare has introduced tools that allow websites to block AI crawlers or charge them for access, giving publishers more control. The approach has been welcomed by many media companies, while some AI companies have criticised it.
As AI agents increasingly browse the web on behalf of users, Cloudflare's position as an intermediary between websites and visitors gives it a significant role in shaping how the AI-driven internet works.
Cloudflare's customer base ranges from individual developers and small businesses using its free and low-cost plans to large enterprises and governments paying for advanced security and performance services. This broad funnel allows it to convert smaller customers into larger, paying ones over time, a key driver of its revenue growth. Its developer platform has become an increasingly important part of this strategy, as developers building AI applications look for inexpensive, globally distributed computing.
What comes next
Investors will watch whether Cloudflare can sustain its accelerated growth, achieve GAAP profitability as promised and continue to benefit from AI-driven demand. With growth accelerating and its role in the AI economy expanding, Cloudflare is positioning itself as one of the key infrastructure companies of the AI era.
