Takeaways by Saasverse AI
- Revenue: $562M (+31% YoY) | Net Income: N/A (Non-GAAP Operating Margin: 15.3%) | Key Metrics: FCF $75M (+59.6%), NRR 119%, Billings $624M (+39.6%).
- Cloud and AI Growth: Strong demand for cloud security and edge computing solutions; AI-focused Workers platform gains traction.
- Market Momentum: Stock up 120% YTD, reaching $247.17/share; FY revenue guidance raised, Q4 revenue projected at $589M.
Cloudflare, a leader in cloud computing and network security, delivered exceptional results in Q3 FY2025, with revenue and profitability surpassing Wall Street expectations. The company reported $562 million in revenue, marking a 31% year-over-year increase and the second consecutive quarter of accelerated growth. This momentum underscores Cloudflare's successful transition from a product-centric model to an enterprise-grade sales strategy, a shift CEO Matthew Prince described as a "highly robust" transformation.
The company achieved a non-GAAP operating margin of 15.3%, highlighting its scalability and operational efficiency. Free cash flow surged 59.6% year-over-year to $75 million, representing 13% of total revenue. Billings, a forward-looking indicator of future revenue, climbed 39.6% to $624 million. Operating cash flow reached $167 million, while Cloudflare's cash and marketable securities balance stood at a healthy $4.04 billion.
Enterprise adoption remained a key growth driver, with large enterprise customers now contributing 73% of total revenue. The net revenue retention rate (NRR) rose to 119%, reflecting strong customer engagement and upsell opportunities. Cloudflare's core businesses in cloud security and edge computing saw robust demand, while the company's innovative Workers developer platform—especially in AI applications—emerged as a standout performer. Additionally, Cloudflare's newly launched AI infrastructure services received positive market feedback, reinforcing its competitive edge in the "interconnected cloud" ecosystem.
CEO Prince highlighted the company's pivotal role in the AI sector, stating that "80% of leading AI companies rely on our services." This adoption cements Cloudflare's position as a critical enabler for AI-driven innovation, particularly through its edge computing capabilities and developer-friendly platforms.
In light of these achievements, Cloudflare raised its full-year revenue guidance and now projects Q4 revenue to reach $589 million. The company also reaffirmed its ambitious goal to achieve $3 billion in annual revenue by the end of 2026. This optimism is mirrored in the market, as Cloudflare's stock has soared 120% year-to-date, closing at a record $247.17 per share, marking a new 52-week high.
Saasverse Insights
Cloudflare’s strong financial and operational performance highlights its continued leadership in cloud security and edge computing markets. However, as the company scales its enterprise sales and AI-driven services, maintaining its rapid growth trajectory while managing profitability margins will be crucial for long-term success. With its innovative platforms and expanding enterprise customer base, Cloudflare is well-positioned to capitalize on the growing demand for secure, scalable, and AI-enabled cloud solutions in the years ahead.