Cloudflare (NET) Q1 2026 earnings summary

Executive summary

• Revenue grew 34% year-over-year to $639.8 million in Q1 2026, driven by strong demand, large customer expansion, and international growth.

• Large customers (>$100K annual spend) increased 25% year-over-year to over 4,400, now representing 72% of revenue.

• Announced a 20% workforce reduction (about 1,100 employees) to accelerate transition to an agentic AI-first operating model, with estimated restructuring charges of $140–$150 million.

• Net loss narrowed to $22.9 million (GAAP), while non-GAAP net income was $94 million ($0.25 per diluted share).

• Ended Q1 with $4.16 billion in cash, cash equivalents, and available-for-sale securities.

Financial highlights

• Gross margin was 71.2% GAAP (down from 75.9%) and 72.8% non-GAAP (down from 77.1%), reflecting higher technology and network costs.

• Non-GAAP income from operations was $73.1 million (11.4% margin), up from $56.0 million.

• Free cash flow was $84.1 million (13% of revenue), up from $52.9 million (11%).

• Operating cash flow for Q1 2026 was $100 million, with a 19% margin.

• Remaining performance obligations (RPO) grew 36% year-over-year to $2.543 billion.

Outlook and guidance

• Q2 2026 revenue expected at $664–$665 million (30% year-over-year growth), with non-GAAP income from operations of $90–$91 million and EPS of $0.27.

• Full-year 2026 revenue guidance is $2.805–$2.813 billion (30% year-over-year growth), non-GAAP income from operations $418–$421 million, and EPS $1.19–$1.20.

• Free cash flow expectations for 2026 remain unchanged, with 25–30% of annual cash generation in Q2 and Q3.