Content delivery network and cybersecurity tooling provider Cloudflare Inc.’s stock was heading higher in extended trading today, posting gains of more than 10% on the back of stellar second-quarter financial results and strong guidance.
The company reported earnings before certain costs such as stock compensation of 20 cents per share on sales of $401 million, up by an impressive 30% from the year-ago period. The results easily beat Wall Street’s expectations, with analysts having forecast it to deliver earnings of just 14 cents per share on sales of $394 million.
Cloudflare also made big strides on its path to profitability, delivering a net loss of $15.1 million, well down from the $94.5 million loss it posted one year ago.
Co-founder and Chief Executive Matthew Prince (pictured) hailed the company’s “terrific results,” which appeared to catch investors by surprise. In the regular trading session, prior to the report being published, Cloudflare’s stock had declined 4%. “We had a strong second quarter, crossing $1.6 billion in annualized revenue and growing 30% year-over-year,” Prince said.
Cloudflare’s content delivery network enhances the security, speed and performance of websites and other online services. Its technology works as a kind of intermediary between its customers’ users and servers, caching and delivering content, filtering traffic and blocking security threats.
In recent months, the company has faced some headwinds, with many of its customers scaling back their information technology budgets to protect themselves against economic uncertainty. In addition, Cloudflare seems to be facing more competition from traditional cybersecurity companies such as Palo Alto Networks Inc. and CrowdStrike Holdings Inc. Those rivals provide alternative, consolidated security platforms that can not only protect, but also boost the performance of multiple applications, including websites.
Cloudflare’s response has been to try to beat those rivals at their one game, debuting innovative new products such as its new Cloudflare for Unified Risk Posture suite of cyber risk management tools. The new capabilities, served via Cloudflare’s single unified platform, allow organizations to evaluate risk across users and applications, exchange risk indications and enforce automated risk controls.
The company is also trying to cash in on customer’s fears that their content is being used to train artificial intelligence models without their permission. Last month, it announced a new tool within its flagship CDN platform that’s able to detect and block AI bots from scraping customer’s websites for data that will be used to train generative AI models.
Third Bridge analyst Charlie Miner said Cloudflare’s investors are “dancing to the tune of a second quarter beat and raise,” and highlighted a double-digit improvement in sales productivity. “That’s a trend our experts say must continue to drive the level of profitable growth investors expect moving forward,” he added.
“Forgetting short-term market cap fluctuations, Cloudflare heads into the second half of 2024 with industry-leading 30% growth and expanding FCF margins, while continuing to dance on the cutting edge of platform innovation that has helped catapult them to the forefront of the application software market,” Miner said.
The impressive results appear to have given Cloudflare confidence over its near-term prospects. In its guidance for the third quarter, it said it’s aiming to deliver earnings of 18 cents per share on revenue of $423 million to $424 million, above the Street’s consensus estimate of 15 cents in earnings and $423 million in sales.
For the full year, Cloudflare is eyeing earnings of 70 cents per share on sales of $1.657 billion to $1.659 billion. Wall Street’s full-year targets call for earnings of 61 cents per share on total revenue of $1.65 billion.