Cloudflare, Inc. NET used its third-quarter 2026 earnings call to emphasize accelerating demand for developer infrastructure and security, rather than growth concentrated among a few AI customers. Management pointed to enterprise expansion and usage-based contracts as key contributors.
Revenues rose 39% to $782.5 million, above the $734.3 million Zacks Consensus Estimate. Adjusted earnings of $0.38 per share beat the $0.35 estimate. Management also advanced its GAAP profitability timetable.
Cloudflare, Inc. Price, Consensus and EPS Surprise
Cloudflare, Inc. price-consensus-eps-surprise-chart | Cloudflare, Inc. Quote
NET Sets an Earlier Profit Milestone
Chief financial officer Thomas Seifert projected fourth-quarter revenues of $845-$846 million, indicating 38% year-over-year growth. He forecast adjusted earnings of $0.43 per share.
Management expects fourth-quarter non-GAAP operating income of $156-$157 million. Seifert also anticipates GAAP profitability then, ahead of the prior target of no later than 2028.
For 2026, Seifert guided revenues of $2.963-$2.964 billion, non-GAAP operating income of $462-$463 million and adjusted earnings of $1.35 per share.
Cloudflare Sees Broad Usage-Led Expansion
Responding to Goldman Sachs, Seifert said that variable revenue accounted for most of the third-quarter upside as customers consumed prepaid pool-of-funds commitments faster.
He mentioned that earlier renewals frequently brought larger commitments and were spread across many accounts. That broad distribution was central to the company's fourth-quarter outlook.
Large customers contributed 75% of revenues, while dollar-based net retention climbed to 122% from 120% sequentially. Seifert said that this retention rate could rise further as cross-selling expands.
NET Turns Developer Adoption Into Enterprise Sales
Chief executive officer Matthew Prince said that active developers surpassed 10 million, up from 7 million a quarter earlier. Cloudflare added more than 158,000 paying customers. Prince argued its isolated architecture handles agent workloads more efficiently than container-based clouds.
In response to Morgan Stanley, Prince explained that large businesses increasingly make Workers available through companywide commitments, spurring developer usage and faster consumption.
Seifert said that lower Workers selling costs offset thinner gross margins. Non-GAAP operating margin reached 17.5%, despite non-GAAP gross margin easing to 72.4%. He also highlighted compute-efficiency gains.
Cloudflare Builds New AI Traffic Revenue Models
Prince said that Cloudflare recognized its first revenues from Act 4 products, aimed at new economic arrangements between AI agents and online content providers.
Asked by Goldman Sachs about timing, Prince described OpenAI paying Cloudflare for website-change signals that help avoid unnecessary crawling while keeping information current.
He also discussed future micropayments and advertising arrangements, but framed them as a longer-term opportunity. Prince envisioned this category becoming the company's largest business within a decade.
NET Positions Security as a Growth Driver
CEO Prince attributed part of the acceleration to customers seeking protection against newly discovered software vulnerabilities. He described strong interest across finance, government and other industries, not just AI-native companies.
Cloudflare signed a five-year $10.3 million agreement with a U.S. federal department for SASE, alongside a 13-month $15.5 million Magic Transit agreement with a Fortune 100 cloud infrastructure provider.
Responding to JPMorgan, Prince said that demand for securing AI agents is helping Cloudflare enter more Zero Trust evaluations and improve win rates against earlier-generation providers.
Cloudflare Refines Enterprise Sales Execution
New president of revenue Christian Smith prioritized enterprise execution, partner development and faster customer adoption. He succeeds Mark Anderson, who plans to retire at year-end and remain an adviser.
Asked by Jefferies about execution, Prince outlined plans to expand forward-deployed engineering coverage and reassess technical sales roles as enterprise deployments grow more complex.
Responding to Citi about restructuring, Prince said that AI automation is shifting hiring toward builders and sellers rather than serving as a broad head-count reduction effort. He cited time freed for customer-facing sales work.
NET Keeps Operating Discipline Central
Prince characterized Cloudflare's next phase as a combination of developer-platform adoption and cybersecurity demand. His emphasis remained on turning technical differentiation into broader customer relationships.
Seifert reinforced the focus on disciplined capital allocation and operating leverage as management pursues growth through its global network and developer platform.
Cloudflare's Zacks Rank and Style Signals
NET carries a Zacks Rank #2 (Buy) at present, a favorable near-term earnings-revision signal. Its Momentum Score of A points to stronger price-trend characteristics, while its Value Score of F indicates weaker valuation appeal. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Growth Score of C and combined VGM Score of C leave its overall style profile mixed rather than uniformly favorable. The Zacks Rank can change as analysts revise their estimates following the latest results.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This innovative software-as-a-service firm upped its user base +22% year over year. That rate is increasing and margins are expanding as AI efficiencies take effect. Of course, all our elite picks aren't winners, but this one could far surpass earlier Zacks' Stocks Set to Double like D-Wave Quantum, which shot up +680.1%.
Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Cloudflare, Inc. (NET): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).