0001477333-26-000016
SEC filingCloudflare's 2025 revenue grew 30% YoY to $2.17B, driven by 40% paying customer growth and 120% dollar-based net retention, though gross margin contracted 200 bps.
Cloudflare describes itself as a leader in the 'Connectivity Cloud' category, offering a broad range of services to make businesses more secure, enhance performance, and reduce complexity. The company's network serves as a scalable, unified control plane across on-premises, hybrid, cloud, and SaaS environments. Its architecture is serverless, running every service on every server in every city, enabling efficient scaling and innovation.
While Cloudflare does not disclose formal reporting segments, its product suite is organized into four groups: Application Services (security and performance for Internet properties), SASE Platform (network services and Zero Trust security), Developer-based Solutions (serverless compute, storage, AI, and media), and Consumer Offerings (1.1.1.1 DNS, WARP, Registrar). No revenue share is provided for these groups in the Business section.
Key products include Cloudflare Workers (serverless compute), Workers AI (GPU-accelerated AI inference), WAF, DDoS Mitigation, Bot Management, Magic WAN, Cloudflare Zero Trust Network Access, R2 Object Storage, and consumer apps like 1.1.1.1 with WARP. The network is API-driven and designed for developers, with a free tier that drives global scale.
Cloudflare uses a multi-pronged approach: direct sales for Enterprise (contracted) customers, indirect sales via channel partners, and self-service for pay-as-you-go and free users. As of December 31, 2025, it had ~332,000 paying customers across 190+ countries, with 4,298 large customers. No single customer accounts for over 10% of revenue. The company also leverages consumer products as a marketing channel.
Cloudflare faces competition from on-premises network hardware vendors, point solution vendors (e.g., security, CDN, DNS, email, SD-WAN), and public cloud vendors for storage and compute. Key competitive factors include network breadth, integrated solutions, unified control plane, performance, scalability, total cost of ownership, ease of use, global coverage, and trust. The company believes it is favorably positioned due to its cloud-native, multi-tenant approach and alignment with customer interests (e.g., not selling user data).
The growth strategy includes: (1) acquiring new customers across all tiers, (2) expanding existing relationships through upgrades and cross-sell, (3) developing new products leveraging network innovation, and (4) extending developer solutions (e.g., Workers) to capture storage and compute workloads. The free tier is a key driver of scale and partner attractiveness.
As of December 31, 2025, Cloudflare had 5,156 full-time employees (2,452 outside the U.S.). None of the U.S. employees are unionized; some international employees are represented by works councils. The company emphasizes culture defined by seven 'Cloudflare capabilities,' competitive compensation, equity ownership, comprehensive benefits, and diversity initiatives. It has been recognized as a Top 100 Most Loved Workplace by Newsweek in 2023-2025.
Cloudflare's revenue for fiscal year 2025 reached $2.167B, a 30% increase from $1.670B in 2024. The growth was driven by a 40% increase in paying customers to 332,466 and a strong dollar-based net retention rate of 120% for Q4 2025, reflecting both new logo acquisition and expansion within existing accounts. Gross profit grew 25% to $1.615B, but gross margin contracted from 77% to 75% due to a 46% surge in cost of revenue. The cost increase was primarily attributable to higher third-party technology services ($59.2M), co-location and network costs ($54.1M) to support the expanded customer base, and increased depreciation ($45.2M) from server deployments.
On an operating basis, GAAP loss from operations widened to $207.2M (negative 10% margin) from $154.8M (negative 9% margin) in 2024, driven by a 26% increase in total operating expenses. Sales and marketing rose 23% to $920.8M, reflecting a 25% headcount increase and higher marketing program spending. Research and development increased 22% to $512.4M, and general and administrative expenses grew 40% to $389.3M, largely due to stock-based compensation. Non-GAAP income from operations improved to $303.9M (14% margin, flat YoY), excluding $489.9M in stock-based compensation and related payroll taxes, $15.0M in amortization, and other non-recurring items. Net loss deepened to $102.3M from $78.8M, despite higher interest income ($131.2M vs. $87.4M) driven by a larger investment portfolio.
Revenue by geography shows growing international contribution. United States revenue grew 26% to $1.073B, representing 49% of total (down from 51% in 2024). The Europe, Middle East, and Africa region contributed $598.6M (28% of revenue, +28% YoY). Asia Pacific was the fastest-growing segment, with revenue up 48% to $329.8M, increasing its share from 13% to 15%. The 'Other' category grew 28% to $166.6M. Overall, international markets accounted for 51% of revenue in 2025 versus 49% in 2024, driven by the company's global network presence in over 330 cities.
Management did not provide specific forward guidance for fiscal 2026, but the MD&A outlines strategic priorities: continued investment in product development, network infrastructure (including GPU servers for AI-related products), and international expansion. The company expects operating expenses to increase in absolute dollars across all functions, though as a percentage of revenue they are expected to decline over the long term. Key risks cited include macroeconomic uncertainty, tariffs, and geopolitical tensions, which could lengthen sales cycles, slow pipeline conversion, and increase churn. Management highlighted that macroeconomic uncertainty could persist through 2026. On the capital allocation front, Cloudflare has ample liquidity ($943.5M cash, $3.16B in available-for-sale securities, and an undrawn $400M credit facility) to fund operations and growth initiatives, though the company acknowledged it may require additional capital to execute strategic initiatives. The change in server useful life estimate (from four to five years, effective 2024) reduced depreciation by $21.1M in 2025.
Cloudflare ended 2025 with $943.5M in cash and cash equivalents and $3,157.7M in available-for-sale securities, providing substantial liquidity. Total convertible debt stood at $3,265.4M (face value $3,293.8M), including $1,291.3M classified as current (2026 Notes) and $1,974.1M non-current (2030 Notes). Shareholders' equity grew to $1,459.1M from $1,046.2M a year earlier, driven by stock-based compensation and the convertible note issuance. The company also has an undrawn $400M revolving credit facility.
The Notes disclose $255.2M in non-cancelable purchase commitments as of December 31, 2025, primarily for bandwidth and co-location services ($179.4M) and open purchase agreements ($65.0M). Payments due within one year total $101.9M, with $116.5M in 1-3 years and $36.8M thereafter. Operating lease liabilities amount to $252.9M, with weighted-average remaining term of 4.7 years. Additionally, $59.1M in undiscounted future payments for leases not yet commenced were noted.
Cloudflare raised $2.0B through issuance of 0% Convertible Senior Notes due 2030 in June 2025, using $283.4M to purchase capped calls to offset dilution. No share repurchases or dividends were declared. The 2025 Notes were fully settled or repurchased in prior years. Capital expenditures are reported in the cash flow statement (not within the Notes narrative) and are not included here to comply with scope.
Cloudflare operates as a single reportable segment. Geographical revenue breakdown from Note 3: United States 49%, Europe/Middle East/Africa 28%, Asia Pacific 15%, Other 8%. Property and equipment is split roughly equally between the US ($298M) and rest of world ($320M). No customer exceeds 10% of revenue. The company provides disaggregated revenue by customer type: channel partners contributed 26% ($568.9M) and direct customers 74% ($1,599.1M) in 2025.
Cloudflare continues to report net losses ($102.3M in 2025) and an accumulated deficit of $1.2B. Revenue growth slowed to 30% in 2025 from 29% in 2024, and the company warns that historical growth is not indicative of future performance. Operating expenses are expected to rise as the company hires, expands infrastructure, and develops products, making profitability uncertain.
The risk factors detail significant exposure to adverse economic conditions, including tariffs, inflation, and rising interest rates. These could reduce customer spending, lengthen sales cycles, and increase churn. Geopolitical tensions (e.g., conflicts in Ukraine and the Middle East) may further depress demand and disrupt operations. The company notes that the full impact of these factors is unpredictable.
Cloudflare faces intense competition from large incumbents (public cloud providers, telecoms, on-premises vendors) with greater resources, brand recognition, and ability to bundle products. The company's growth depends on attracting and retaining large enterprise customers, which involve longer sales cycles, more complex negotiations, and higher churn risk. Failure to innovate or obtain necessary security certifications (e.g., FedRAMP) could hinder market acceptance.
Cybersecurity remains a critical risk: past breaches (e.g., a nation-state intrusion in November 2023) and network outages (e.g., software update failures in November/December 2025) could harm reputation and lead to significant remediation costs. The company also relies on third-party co-location facilities and a limited number of hardware suppliers; component shortages (DIMMs, SSDs, CPUs) may delay network expansion. Additionally, errors in customer configuration or product flaws could result in service credits or customer loss.
Sales to government entities require certifications like FedRAMP; failure to maintain these could limit public sector revenue. The company also faces risks from evolving privacy and data protection laws, as well as potential liability from customer activities (e.g., hosting controversial content).
Overall, the risk factors emphasize that Cloudflare's business is subject to a wide range of external and internal pressures, with no single risk dominating but many interrelated threats to growth and profitability.
The provided text does not include the Consolidated Statements of Cash Flows. Therefore, no analysis of cash flow quality, CFO vs net income, capex intensity, or FCF coverage can be performed. The excerpt primarily consists of the independent auditor's report and a critical audit matter concerning revenue recognition. No cash flow figures are disclosed.