Cloudflare Earnings Takeaways: Zero Trust, Generative AI Security, Channel Growth

Beating Forecasts

While the economic slowdown has caused many tech companies to fall short of analyst expectations for their latest financial results — and many have laid off staff, as well — Cloudflare so far has done neither. For the fourth quarter, revenue climbed 47 percent year-over-year to reach $274.70 million, beating the analyst consensus estimate of $274.02 million. And on earnings, Cloudflare saw non-GAAP net income of 6 cents per diluted share during the fourth quarter, compared to the 4 cents that was anticipated by an analyst consensus. “We had another strong quarter in spite of continued challenging macroeconomic conditions,” Prince said during the quarterly call Thursday.

In Q4, Cloudflare added 134 “large” customers — which it defines as customers paying more $100,000 per year to the company — bringing Cloudflare to 2,042 large customers in total, according to Prince. That includes 33 percent of the companies in the Fortune 500, he said.

Still, “like others in the industry, we’re seeing customers take longer to sign new and expansion deals with us,” Prince said. In response to the economic environment, “we have our hands on the levers of our business, and are adjusting them based on the macroeconomic conditions,” he said. Cloudflare has not disclosed staff cutbacks thus far, however, because it was quicker to pump the brakes on hiring than some others in the tech industry, Prince said.

“We started to see a slowdown in the economy all the way back in December of 2021,” he said. “Based on that, around this time last year, we began slowing our pace of hiring to ensure we didn’t get over our skis. That paid off and kept us from having to take more drastic actions like many of our peers.”

Meanwhile, Cloudflare delivered strong guidance for its full-year 2023 results, saying it’s expecting revenue of between $1.33 billion an $1.34 billion and non-GAAP net income per share of 15 cents to 16 cents, both of which topped analyst predictions.