Key Highlights
- Q1 2026 revenue reached $639.8 million, marking a 33.5% year-over-year increase and surpassing estimates by 3%
- Adjusted earnings per share of $0.25 exceeded analyst forecasts by 7%
- Enterprise accounts spending over $100K annually expanded 25% to 4,416, representing 72% of total revenue
- Shares declined 12% to $223.96 following the earnings announcement, then rebounded 3.3% in after-hours to $251.39
- Management elevated full-year 2026 revenue projections to $2.81 billion at the midpoint
Cloudflare delivered robust first-quarter 2026 financial results on May 7, surpassing Wall Street expectations across revenue, profitability, and billings metrics. Despite the positive performance, shares experienced an immediate 12% decline to $223.96.
Quarterly revenue totaled $639.8 million, representing a 33.5% climb from the year-ago period and exceeding the $620.9 million analyst consensus. Adjusted earnings per share of $0.25 outperformed the $0.23 Street estimate by 7%.
Billings reached $709.4 million — climbing 37.8% year-over-year. This metric’s growth rate outpaced revenue expansion, indicating robust forward revenue potential.
The enterprise customer base — defined as accounts producing more than $100,000 in annual recurring revenue — expanded 25% to reach 4,416 clients. This segment now contributes 72% of overall revenue, compared to 69% in the prior-year quarter.
Dollar-based net retention measured 118%, declining modestly from the 120% recorded in Q4 2025 while still demonstrating healthy account expansion.
Enterprise Growth Accelerates
Cloudflare’s focus on enterprise clients continues yielding positive outcomes. The company now counts 42% of Fortune 500 organizations as paying customers, while the large account segment has maintained a 30% compound annual growth rate across the previous two years.
Non-GAAP gross margin stood at 73% in Q1, compared to 77% in the same quarter of 2025. Leadership highlighted the serverless infrastructure and commodity hardware approach as foundational elements supporting margin stability.
Non-GAAP operating margin reached 11.4% for the quarter. Company projections call for a 15% operating margin across the entire fiscal year.
Operating cash flow totaled $158 million, yielding a 25% margin. Free cash flow margin came in at 13.1%, down from the prior quarter’s 16.2%.
Forward Projections and Financial Position
For the second quarter of 2026, Cloudflare projected revenue between $664 million and $665 million, implying approximately 30% year-over-year growth. Adjusted EPS guidance for Q2 stands at $0.27.
Full-year 2026 revenue expectations were elevated to a range of $2.805 billion to $2.813 billion, up from the previous midpoint of $2.79 billion. Annual EPS guidance was increased to $1.19–$1.20, marking a 7.2% lift at the midpoint.
The company maintained $4.164 billion in cash and equivalents as of March 31, 2026. Long-term operating margin objectives remain positioned above 20%, with free cash flow margin targets of approximately 25% or higher.
Shares recovered 3.3% during after-hours trading to $251.39, positioning the stock close to its 52-week peak of $260. Cloudflare’s market capitalization ranged between approximately $87.5 billion and $90.6 billion at the time of the report.
