Revenue

+26.5% (from $378.602M in Q1 2024 to $479.087M in Q1 2025)

The 26.5% YoY revenue increase is driven by strong customer growth through the addition of new paying customers and consistent expansion in spending by existing customers (with a 111% dollar-based net retention rate), reflecting robust underlying business performance and market demand. " "

Cost of revenue

+35.9% (from $85.038M in Q1 2024 to $115.576M in Q1 2025)

The 35.9% increase in cost of revenue is largely due to higher expenses in co-location facilities, network and bandwidth services, and increased third-party technology services costs, which have risen to support the boosted customer base—resulting in cost growth that outpaced revenue gains. " "

Operating loss

Narrowed by approximately 2.4% (from $(54.550)M to $(53.247)M)

Although revenue growth was strong, the operating loss only improved modestly because rising operating expenses—including higher cost of revenue and increased investments in sales and marketing and R&D—offset some of the gains, indicating ongoing challenges in managing cost efficiencies. " "

Net loss

Expanded by 8.2% (from $(35.543)M to $(38.454)M)

The 8.2% deterioration in net loss reflects that despite the higher revenue, increased spending in key areas such as cost of revenue, R&D, and sales and marketing has led to larger overall losses, underscoring challenges in profitability management amid aggressive growth initiatives. " "

Research and development expenses

+31% (from $87.703M in Q1 2024 to $115.089M in Q1 2025)

The 31% jump in R&D expenses indicates a significant investment in technology and innovation, driven by an expanding headcount and higher employee-related costs, which builds on previous fiscal initiatives to advance product capabilities and maintain a competitive edge. " "

Sales and marketing expenses

+10% (from $194.102M in Q1 2024 to $214.011M in Q1 2025)

The 10% increase in sales and marketing expenses is attributed to higher investments in customer acquisition and retention, supported by an increase in headcount and enhanced spending on advertising, travel, and digital marketing initiatives, continuing a trend seen in prior periods to drive market share growth. " "

Revenue

Q1 2025

no prior guidance

$468 million to $469 million, representing a 24% year-over-year increase "

no prior guidance

Operating Income

Q1 2025

no prior guidance

$54 million to $55 million "

no prior guidance

Effective Tax Rate

Q1 2025

no prior guidance

21% "

no prior guidance

Diluted Net Income Per Share

Q1 2025

no prior guidance

$0.16, assuming approximately 362 million shares outstanding "

no prior guidance

Revenue

FY 2025

no prior guidance

$2.090 billion to $2.094 billion, representing a 25% year-over-year increase "

no prior guidance

Operating Income

FY 2025

no prior guidance

$272 million to $276 million "

no prior guidance

Effective Tax Rate

FY 2025

no prior guidance

21% "

no prior guidance

Diluted Net Income Per Share

FY 2025

no prior guidance

$0.79 to $0.80, assuming approximately 366 million shares outstanding "

no prior guidance

Revenue Weighting

FY 2025

no prior guidance

Second half of 2025 expected to be 40 to 50 basis points higher compared to the relative mix in 2024 "

no prior guidance

Network CapEx

FY 2025

no prior guidance

12% to 13% of revenue "

no prior guidance

Revenue Growth & Market Expansion

In Q2–Q4 2024, Cloudflare consistently emphasized strong revenue growth, expanding geographic presence (e.g., U.S. 50%, EMEA 28%, APAC 13–14%) and robust customer growth with significant increases in large customer segments. " " " " " "

In Q1 2025, revenue growth remains a key theme with 27% YoY increase in revenue, marked improvements in large customer deals and remarkable APAC growth (54% YoY, 15% revenue contribution). " "

Consistent strong growth with enhanced emphasis on geographic and enterprise expansion; APAC growth accelerated compared to earlier periods.

Enterprise Customer Growth & Large Contracts

Q2–Q4 2024 calls highlighted growing enterprise customer numbers (increases of 27–30% YoY) and record-large contracts (including multiple multi‑million dollar deals) that significantly boosted the enterprise segment’s revenue contribution. " " " " " "

Q1 2025 continued the narrative with a record number of large customers (3,527, +23% YoY) and notably landed the largest contract in company history (over $100 million) alongside accelerated growth in customers spending over $1M and $5M annually. " "

Increasing momentum in enterprise expansion with record contractual milestones; sentiment is very bullish compared to previous periods.

Sales Execution & Go-to-Market Strategy

Throughout Q2–Q4 2024, Cloudflare focused on improving sales productivity, shortening sales cycles, ramping enterprise sales capacity, and showcasing a go‑to‑market transformation (evidenced by double-digit productivity improvements and increased ramped AE hires). " " " " " "

Q1 2025 reinforced these improvements with continued sequential gains in sales productivity and capacity, along with leadership efforts credited for achieving world‑class execution and record deals tied to go‑to‑market excellence. " " "

Consistent and steadily improving; transformation initiatives are maturing further with strong operational results.

Operational Performance & Cash Flow

Q2–Q4 2024 earnings consistently reported robust operational metrics such as high gross margins (≈78–79%), improving operating income/margins, and strong free cash flow generation; these metrics underpinned disciplined cost management. " " " " " "

In Q1 2025, Cloudflare delivered strong operational performance: revenue up 27% YoY, operating income increased 32% YoY, and free cash flow reached $52.9 million (11% of revenue), signaling improved efficiency and cash management. " " "

Stable and improving operational efficiency; cash flow and margins continue to strengthen, supporting future investments.

Pool of Funds Deals & Revenue Recognition Challenges

In Q2–Q4 2024, Cloudflare frequently discussed pool‑of‑funds deals—addressing challenges in revenue recognition, deferred revenue metrics, and short‑term impacts on DNR, while noting their strategic benefits for long‑term customer adoption. " " " " "

Q1 2025 acknowledged that pool‑of‑funds contracts create near‑term headwinds for revenue recognition and DNR (remaining stable at 111%) though management expressed confidence as these challenges come into focus. "

Consistent challenge; the issues persist but are stabilizing, with management maintaining a positive long‑term view.

AI Inference, AI Agents & Advanced Technology Adoption

Prior periods (Q2–Q4 2024) focused primarily on AI inference capabilities—with significant improvements in efficiency and cost‐advantage versus hyperscalers—while innovation in advanced technology was noted, though explicit discussion of “AI agents” was less pronounced. " " " " " " "

Q1 2025 marked an evolution by reporting explosive year‑over‑year increases in AI inference requests (nearly 4,000% and over 1,200% for gateway requests) and introduced strong emphasis on developing AI agents via the MCP server, positioning Cloudflare at the center of AI adoption. " "

Growing importance and acceleration; the focus on AI has deepened, with AI agents emerging as a strategic advancement alongside continued inference growth, indicating major future impact.

Developer Platform Adoption & Innovation

In Q2–Q4 2024, Cloudflare highlighted rapid developer platform adoption with increasing active developers (crossing 2–3 million at times), strong interest in Workers and Workers AI, and notable external validation (e.g. high excitement per surveys). " " " " " " "

Q1 2025 underscored the trend with landmark deals (e.g. a 5‑year $130 million contract for the workers platform) and continued explosive growth in AI inference activity on the platform, reflecting its role as a key growth engine. " " "

Consistently high and advancing; developer adoption and innovation remain core, with milestone contracts enhancing the platform’s strategic role.

Public Sector Expansion & FedRAMP Compliance

In Q2–Q4 2024, there was strong emphasis on public sector traction including FedRAMP certifications, pipeline growth in the federal space, and supportive initiatives (e.g. election security efforts) that fortified government relationships globally. " "

Q1 2025 continued to stress public sector expansion with multiple government contracts across the U.S., APAC, and Europe, reinforcing that Cloudflare’s advanced security, including Zero Trust offerings, remains a key differentiator. " "

Steady and reinforcing; progress in FedRAMP and government deals is maintained, ensuring significant future revenue from the public sector.

Competitive Pressures in SASE & Zero Trust Markets

Q2–Q4 2024 discussions detailed a highly competitive landscape with first‑generation vendors facing customer dissatisfaction, while Cloudflare’s comprehensive, high‑performance platform (fastest network, bundling of services) enabled it to displace competitors. " "

In Q1 2025, executives reiterated that Cloudflare’s superior performance, bundling, and comprehensive capabilities continue to provide a competitive edge in SASE and Zero Trust markets, helping win critical contracts especially in government and large enterprise deals. " " "

Sustained competitive advantage; despite intense competition, Cloudflare’s integrated strategy and performance improvements keep it ahead, with slight improvements as market trends favor its model.

Leadership Transformation & Sales Team Improvements

Across Q2–Q4 2024, Cloudflare showcased a transformational narrative—strong leadership under Mark Anderson and strategic hires led to dramatic improvements in sales productivity, ramped AE performance, and enterprise focus, while also integrating new leaders from product/engineering. " " " " "

Q1 2025 reaffirmed this transformation with continued improvements in sales execution, shortened cycles, increased hiring of high‑caliber sales talent, and world‑class go‑to‑market capabilities credited to transformational leadership. " " " "

Continuing positive evolution; leadership and sales execution improvements are consistent and accelerating, further strengthening growth prospects.

Regional Performance Variations

Q2–Q4 2024 discussions detailed regional differences: the U.S. around 50% of revenue with 22–28% growth, EMEA showing strong double‑digit growth (27–32%), and APAC growing steadily (13–14% revenue, 29–38% growth) with notable upticks in both sequential and YoY metrics. " " "

In Q1 2025, regional performance remained robust with the U.S. slightly lower (49% of revenue, 20% growth), steady EMEA (28% of revenue, 27% growth), and APAC emerging as a standout with 15% revenue and a remarkable 54% YoY growth, underscoring its increasing importance. "

Consistent pattern with an APAC acceleration; while the U.S. and EMEA remain stable, APAC’s performance is notably driving future growth potential.

Challenging IT Spending Environment

Q2–Q4 2024 earnings repeatedly mentioned a challenging IT spending environment: customers were budget‑conscious, scrutinizing value and driving longer sales cycles; however, improvements became visible later as close rates improved and security remained a top spending priority. " " " "

Q1 2025 did not explicitly dwell on IT spending challenges; instead, discussions focused on strong performance amid a volatile external backdrop. The absence of repeated emphasis suggests that customer confidence may be returning, even if external uncertainties persist. " " "

Reduced emphasis; while external challenges remain, the tone has shifted toward stability and optimism, indicating a potential easing of IT spending constraints.