Revenue growth accelerated to 35.9% YoY in 2026Q2, but gross margin declined to 71.8% and operating margin worsened to -29.6%, reflecting rising costs and SBC.
Cloudflare, Inc. (NET) annual income statement — 9-year revenue, gross profit & net income history
| Metric | TTM | Dec'25 | Dec'24 | Dec'23 | Dec'22 | Dec'21 | Dec'20 | Dec'19 | Dec'18 | Dec'17 |
|---|
| Sales/Revenue | 2.51B | 2.17B | 1.67B | 1.3B | 975.24M | 656.43M | 431.06M | 287.02M | 192.67M | 134.91M |
| Revenue Growth % | 33.53% | 29.85% | 28.76% | 32.97% | 48.57% | 52.28% | 50.18% | 48.97% | 42.81% | - |
| Cost of Goods Sold | 688.97M | 552.52M | 378.7M | 307M | 232.61M | 147.13M | 101.06M | 63.42M | 43.54M | 28.79M |
| COGS % of Revenue | - | 25.49% | 22.68% | 23.67% | 23.85% | 22.41% | 23.44% | 22.1% | 22.6% | 21.34% |
| Gross Profit | 1.82B | 1.62B | 1.29B | 989.74M | 742.63M | 509.29M | 330M | 223.6M | 149.14M | 106.13M |
| Gross Margin % | 72.58% | 74.51% | 77.32% | 76.33% | 76.15% | 77.59% | 76.56% | 77.9% | 77.4% | 78.66% |
| Gross Profit Growth % | - | 25.14% | 30.43% | 33.27% | 45.82% | 54.33% | 47.59% | 49.93% | 40.53% | - |
| Operating Expenses | 2.18B | 1.82B | 1.45B | 1.18B | 943.83M | 636.98M | 436.77M | 331.55M | 234.04M | 115.86M |
| OpEx % of Revenue | - | 84.07% | 86.59% | 90.63% | 96.78% | 97.04% | 101.33% | 115.51% | 121.47% | 85.87% |
| Selling, General & Admin | 1.45B | 1.31B | 1.02B | 817.08M | 645.53M | 447.57M | 309.63M | 240.88M | 179.57M | 82.21M |
| SG&A % of Revenue | - | 60.43% | 61.35% | 63.01% | 66.19% | 68.18% | 71.83% | 83.92% | 93.2% | 60.93% |
| Research & Development | 573.3M | 512.49M | 421.37M | 358.14M | 298.3M | 189.41M | 127.14M | 90.67M | 54.46M | 33.65M |
| R&D % of Revenue | - | 23.64% | 25.24% | 27.62% | 30.59% | 28.85% | 29.5% | 31.59% | 28.27% | 24.94% |
| Other Operating Expenses | 1000K | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Operating Income | -354.38M | -207.21M | -154.76M | -185.49M | -201.2M | -127.68M | -106.77M | -107.95M | -84.9M | -9.73M |
| Operating Margin % | -14.11% | -9.56% | -9.27% | -14.3% | -20.63% | -19.45% | -24.77% | -37.61% | -44.06% | -7.21% |
| Operating Income Growth % | - | -33.89% | 16.56% | 7.81% | -57.58% | -19.59% | 1.09% | -27.15% | -772.55% | - |
| EBITDA | -129.16M | -17.46M | -27.04M | -49.66M | -98.87M | -61.08M | -57.38M | -78.47M | -65.99M | 2.44M |
| EBITDA Margin % | -5.14% | -0.81% | -1.62% | -3.83% | -10.14% | -9.3% | -13.31% | -27.34% | -34.25% | 1.81% |
| EBITDA Growth % | -325.13% | 35.42% | 45.56% | 49.77% | -61.87% | -6.44% | 26.87% | -18.9% | -2800.25% | - |
| D&A (Non-Cash Add-back) | 225.22M | 189.74M | 127.72M | 135.82M | 102.33M | 66.61M | 49.39M | 29.48M | 18.91M | 12.17M |
| EBIT | -186.55M | -83.94M | -65.67M | -171.99M | -185.75M | -198.74M | -100.01M | -103.6M | -85.09M | -8.85M |
| Net Interest Income | 153.06M | 122.45M | 82.23M | 62.3M | 9.89M | -47.26M | -18.38M | 4.67M | 903K | -100K |
| Interest Income | 164.51M | 131.22M | 87.43M | 68.17M | 14.88M | 1.97M | 6.59M | 5.79M | 1.9M | 762K |
| Interest Expense | 11.45M | 8.77M | 5.2M | 5.87M | 4.98M | 49.23M | 24.96M | 1.11M | 992K | 862K |
| Other Income/Expense | 156.38M | 114.5M | 83.89M | 7.62M | 10.47M | -120.29M | -18.2M | 3.23M | -1.19M | 15K |
| Pretax Income | -198M | -92.71M | -70.87M | -177.86M | -190.73M | -247.98M | -124.97M | -104.71M | -86.09M | -9.71M |
| Pretax Margin % | -7.88% | -4.28% | -4.24% | -13.72% | -19.56% | -37.78% | -28.99% | -36.48% | -44.68% | -7.2% |
| Income Tax | 8.28M | 9.56M | 7.93M | 6.09M | 2.65M | 12.33M | -5.6M | 1.11M | 1.08M | 1.03M |
| Effective Tax Rate % | -4.18% | -10.31% | -11.19% | -3.42% | -1.39% | -4.97% | 4.48% | -1.06% | -1.25% | -10.63% |
| Net Income | -206.28M | -102.27M | -78.8M | -183.95M | -193.38M | -260.31M | -119.37M | -105.83M | -87.16M | -10.75M |
| Net Margin % | -8.21% | -4.72% | -4.72% | -14.19% | -19.83% | -39.66% | -27.69% | -36.87% | -45.24% | -7.97% |
| Net Income Growth % | -76.18% | -29.78% | 57.16% | 4.88% | 25.71% | -118.07% | -12.8% | -21.41% | -710.98% | - |
| Net Income (Continuing) | -206.28M | -102.27M | -78.8M | -183.95M | -193.38M | -260.31M | -119.37M | -105.83M | -87.16M | -10.75M |
| Discontinued Operations | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Minority Interest | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| EPS (Diluted) | -0.58 | -0.29 | -0.23 | -0.55 | -0.59 | -0.83 | -0.40 | -0.35 | -0.37 | -0.04 |
| EPS Growth % | -72.87% | -26.09% | 58.18% | 6.78% | 28.92% | -107.5% | -14.29% | 5.41% | -764.49% | - |
| EPS (Basic) | - | -0.29 | -0.23 | -0.55 | -0.59 | -0.83 | -0.40 | -0.35 | -0.37 | -0.04 |
| Diluted Shares Outstanding | 354.33M | 348.42M | 341.41M | 333.66M | 326.33M | 312.32M | 299.77M | 300.17M | 237.32M | 251.09M |
| Basic Shares Outstanding | 354.33M | 348.42M | 341.41M | 333.66M | 326.33M | 312.32M | 299.77M | 300.17M | 237.32M | 251.09M |
| Dividend Payout Ratio | - | - | - | - | - | - | - | - | - | - |
Quick answers to the most common questions about buying NET stock.
For fiscal year 2025, Cloudflare, Inc. (NET) reported total revenue of $2.17B. This represents a 1506.9% increase compared to $134.9M in 2017.
Cloudflare, Inc. (NET) reported a net loss of $102.3M for the fiscal year ending 2025.
Cloudflare, Inc. (NET) reported an operating income of $-207.2M, resulting in an operating profit margin of -9.6%. This margin reflects the operational efficiency of the business before interest and taxes.
Cloudflare, Inc. (NET) generated $1.62B in gross profit for the year, representing a gross profit margin of 74.5%. This demonstrates the company's core pricing power and production efficiency.
Key Metrics
Top Statement Risk
SBC dilution and margin pressure
Metrics are mathematically derived from official filings.
Revenue Growth Accelerates on AI Demand
Cloudflare's revenue growth accelerated to 35.9% year-over-year in 2026Q2, up from 30.5% in 2024Q1, according to the latest quarterly report, suggesting sustained momentum in its security and edge computing offerings.
The sequential acceleration from 33.5% in 2026Q1 to 35.9% in 2026Q2 indicates that the company is capturing increasing demand, likely driven by AI-related workloads and network services. This growth rate outpaces peers like Akamai (5.4%) and Fastly (14.8%), positioning Cloudflare as a share gainer in the infrastructure software space. However, the durability of this acceleration depends on the sustainability of AI-driven spending, which warrants monitoring.
Gross Margin Erosion Pressures Profitability
Gross margin declined from 77.8% in 2024Q2 to 71.8% in 2026Q2, as reported in financial statements, reflecting higher network costs and a changing revenue mix that may pressure long-term profitability.
The 600 basis point contraction in gross margin over the past two years suggests that Cloudflare is incurring higher costs to support its expanding infrastructure and AI-related services. This trend is concerning because it indicates that the company may be sacrificing margin for growth, potentially due to increased depreciation or third-party cloud costs. Investors should monitor whether this is a temporary investment phase or a structural shift that could limit future operating leverage.
Operating Leverage Elusive as Costs Outpace Revenue
Despite 35.9% revenue growth in 2026Q2, operating margin worsened to -29.6% from -14.4% in 2024Q1, based on reported figures, indicating that operating expenses are scaling faster than gross profit.
The operating loss expanded to $205.7 million in 2026Q2, a significant deterioration from the $54.5 million loss in 2024Q1, even as revenue grew substantially. This suggests that SG&A and R&D spending are growing at a faster rate than gross profit, undermining the potential for operating leverage. The spike in SBC to $274.1 million in 2026Q2, nearly double the prior quarter, may be a key driver, but even excluding SBC, operating expenses appear to be growing aggressively.
Earnings Quality Clouded by Stock Compensation
Net loss widened to $170.0 million in 2026Q2, with stock-based compensation of $274.1 million exceeding revenue growth, as per the income statement, raising questions about the quality of reported earnings.
The reported net loss of -$0.48 per share in 2026Q2 is heavily influenced by a surge in SBC, which jumped from $114.2 million in 2026Q1 to $274.1 million in 2026Q2. This non-cash expense, while not affecting cash flow, dilutes shareholders and masks the underlying operational performance. The company's adjusted metrics, if provided, would likely show a different picture, but the GAAP figures suggest that profitability is still far off and that earnings quality is low.
R&D and SG&A Spending Accelerate
R&D and SG&A expenses grew to $159.5 million and $395.0 million respectively in 2026Q2, up from $87.7 million and $260.4 million in 2024Q1, as reported, indicating aggressive investment in growth.
The combined operating expenses (R&D + SG&A) increased by 54% year-over-year in 2026Q2, outpacing revenue growth of 35.9%. This suggests that management is prioritizing market share and product development over near-term profitability, which is typical for high-growth tech companies but raises concerns about cost discipline. The elevated SBC within SG&A and R&D further inflates these figures, and investors should assess whether these investments will translate into future revenue growth or simply erode margins.
2026Q2 Marks a Margin Inflection Point
The 2026Q2 quarter stands out as a negative inflection, with operating margin plunging to -29.6% from -8.0% in 2025Q4, according to the latest financials, driven by a sharp rise in SBC and operating expenses.
This quarter represents a significant departure from the gradual improvement seen from 2024Q1 to 2025Q3, where operating margin improved from -14.4% to -6.7%. The sudden deterioration in 2026Q2, despite strong revenue growth, suggests that the company may have incurred one-time costs or accelerated investments. The spike in SBC to $274.1 million, nearly double the prior quarter, is a key factor, but the underlying cause warrants further investigation. This inflection could signal a new phase of heavy investment or a potential issue with expense management.
Growth at Any Cost Raises Red Flags
Short-sellers would argue that Cloudflare's accelerating revenue growth is unsustainable, given that operating losses widened to $205.7 million in 2026Q2, as per the income statement, while gross margins are contracting.
The company's strategy of aggressive spending on R&D and SG&A, coupled with rising SBC, may be masking underlying inefficiencies. The gross margin decline from 77.8% to 71.8% over two years suggests that the business model may not scale profitably, and the widening operating losses indicate that the path to profitability is not clear. Additionally, the reliance on SBC to attract talent could lead to significant dilution, and if revenue growth decelerates, the company could face a margin crunch. Investors should be cautious about the sustainability of this growth trajectory.