Cloudflare Q2 Earnings Call Highlights

Cloudflare reported revenue of $696.1 million, up 36% year over year, supported by customer additions, higher enterprise adoption and 120% dollar-based net retention. Revenue from customers spending more than $100,000 annually grew, with 4,698 such customers at quarter-end. Non-GAAP operating income rose 33% to $96.1 million, while free cash flow increased to $56.4 million. Cloudflare projected third-quarter revenue of $736 million to $737 million and raised or reaffirmed full-year revenue guidance of $2.864 billion to $2.870 billion. Nearly 2 million developers joined the Workers platform during the quarter, bringing the total above 7.4 million. Management is positioning Cloudflare for rising AI-agent traffic through developer tools, agent monetization and payment products, as well as security offerings for AI workloads. Cloudflare NYSE: NET reported second-quarter 2026 revenue of $696.1 million, up 36% from a year earlier, as the company cited accelerating customer growth, expanding adoption of its Workers developer platform, and demand for products supporting AI-related workloads. Chief Executive Officer Matthew Prince said the company added more than 80,000 paying customers during the quarter, bringing year-over-year paying-customer growth to 74%. Cloudflare ended the period with 4,698 customers spending more than $100,000 annually, a 27% increase from the prior year. The company added 282 such large customers during the quarter and 986 over the past 12 months, its highest annual net addition total for that customer segment. Dollar-based net retention reached 120%, up two percentage points sequentially and six percentage points year over year. Large customers accounted for 73% of quarterly revenue, compared with 71% in the second quarter of 2025. Cloudflare reported non-GAAP operating income of $96.1 million, up 33% from $72.3 million a year earlier. Its non-GAAP operating margin was 13.8%, improving 240 basis points sequentially but declining 30 basis points year over year. Gross margin was 73.1%, up 30 basis points from the first quarter and down 320 basis points from a year earlier. Chief Financial Officer Thomas Seifert said the company continued to see more network costs allocated to cost of revenue as paid traffic grew relative to free traffic, although he said that trend was beginning to stabilize. Seifert said Cloudflare expects gross margin to stabilize around current levels, while total unit economics improve through the remainder of the year. Free cash flow was $56.4 million, or 8% of revenue, compared with $33.3 million, or 6% of revenue, in the prior-year period. Cloudflare ended the quarter with $4.2 billion in cash equivalents and available-for-sale securities. Remaining performance obligations totaled $2.732 billion, up 7% sequentially and 38% year over year. The company reported non-GAAP net income of $107.8 million, or $0.29 per diluted share. Seifert said the quarter included $151 million in severance and other restructuring charges, including $99 million paid during the period. Cloudflare now expects up to $165 million of restructuring charges for the full year, with up to $130 million expected to be cash-related. Third-quarter revenue is expected to be $736 million to $737 million, representing 31% year-over-year growth. Third-quarter operating income is expected to be $12