TLDR
- Cloudflare shares jumped to a record high of $243.20 after beating quarterly revenue forecasts with $562 million in sales versus analyst expectations.
- The company projected fourth-quarter revenue of $589 million, topping the $580.9 million analyst consensus estimate.
- Cloudflare raised its full-year adjusted earnings per share outlook to 91 cents from the previous range of 85 to 86 cents.
- Truist Securities increased its price target from $230 to $275, while other analysts raised targets with Mizuho setting the highest at $280.
- Growth was driven by large enterprise customers in the $1M-$5M range and strong performance in SASE, Zero-Trust, and AI inference products.
Cloudflare stock surged to an all-time high on Friday after the cybersecurity company reported third-quarter results that crushed Wall Street expectations. The shares gained as much as 9.3% to reach $243.20, marking the biggest intraday rally since May.
The San Francisco-based company posted revenue of $562 million for the third quarter. This figure exceeded analyst forecasts by a comfortable margin. For the fourth quarter, Cloudflare projected sales of $589 million, beating the average analyst estimate of $580.9 million.
The strong performance comes after a company reorganization and success in adding large enterprise customers. Revenue grew 31% year-over-year in the quarter. Remaining performance obligations climbed 43%.
Cloudflare also raised its full-year guidance for adjusted earnings per share. The company now expects 91 cents per share, up from its previous range of 85 to 86 cents. This marks the second consecutive quarter of raised guidance.
Analyst Price Targets Climb
Wall Street analysts responded to the results by lifting their price targets. Truist Securities increased its target to $275 from $230 while maintaining a Buy rating. The firm pointed to acceleration in growth driven by the largest customer cohort.
Other firms followed suit with their own increases. TD Cowen raised its target to $265. Piper Sandler moved to $249. UBS adjusted to $245, calling the quarter “standout.”
Citizens set a target of $270. Mizuho went highest with a $280 price target. The company’s shares are up more than 120% for the year. Some analysts have pushed their targets even higher, with one reaching $280.
The analyst community praised Cloudflare’s execution in go-to-market strategy. They highlighted success with SASE, Zero-Trust, and AI inference products. The company maintains gross profit margins above 76%.
Enterprise Growth Drives Performance
The company’s growth is being fueled primarily by its largest customers. The $1M-$5M customer cohort showed particular strength during the quarter. This indicates strong enterprise adoption of Cloudflare’s expanding product portfolio.
Management expressed optimism about the fourth-quarter pipeline. CEO Matthew Prince discussed the company’s position in what he called “the agentic internet of the future.” He said agents will need to pass through Cloudflare’s network and follow its rules.
The company has been courting AI companies heavily. Prince addressed concerns about an AI bubble potentially impacting sales. He estimated that 80% of AI companies use Cloudflare but noted this represents a relatively small portion of overall revenue.
CFO Thomas Seifert confirmed no single customer accounts for more than 2% of revenue. This diversification provides some protection against concentration risk. The company’s widely distributed network has become attractive for customers looking to train AI models and run inference.
Cloudflare competes with larger rivals including Akamai Technologies, Palo Alto Networks, and Fortinet. Its ease of use has appealed to small and midsized businesses. The addition of large customers this year has fueled steady quarterly growth.
The company’s support for generative AI has become a key growth driver. Its positioning at the intersection of AI, security, and cloud computing continues to attract enterprise customers. Product adoption is deepening across the customer base.
Revenue growth of 31% and a 43% increase in remaining performance obligations point to strong momentum heading into the fourth quarter.
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