Cloudflare (NET) Q2 2026 earnings summary

Executive summary

• Achieved Q2 2026 revenue of $696.1 million, up 36% year-over-year, with record growth in large customers and developer adoption, and a dollar-based net retention rate of 120%.

• Large customers (> $100K ARR) reached 4,698, representing 73% of revenue and 27% year-over-year growth.

• Net loss widened to $170.0 million due to higher operating expenses and $150.7 million in restructuring charges related to a 20% workforce reduction.

• Positioned at the center of the shift to AI-driven and agentic internet infrastructure, with significant wins in digital media, technology, federal, and AI sectors.

• Over 7.4 million developers now on the platform, with 2 million added in Q2 alone.

Financial highlights

• Q2 2026 non-GAAP gross margin was 73.1%, up sequentially but down year-over-year; GAAP gross margin was 71.8%.

• Non-GAAP operating profit was $96.1 million (13.8% margin); non-GAAP net income was $107.8 million ($0.29/share).

• Free cash flow reached $56.4 million (8% of revenue), with net cash from operating activities at $117.6 million.

• Cash, cash equivalents, and available-for-sale securities totaled $4.16 billion as of June 30, 2026.

• Operating expenses rose 56% year-over-year, driven by sales, marketing, R&D, and G&A increases.

Outlook and guidance

• Q3 2026 revenue expected at $736–$737 million; non-GAAP operating income $129–$130 million; non-GAAP EPS $0.34.

• FY 2026 revenue guidance raised to $2.864–$2.870 billion, with non-GAAP operating income $443–$445 million and EPS $1.25–$1.26.

• Effective tax rate expected at 20% for Q3 and full year.

• FY 2026 network CapEx expected at 14–15% of revenue.

• Targeting GAAP profitability by 2028.