NET earnings call summary

Prepared Highlights

• Q4 2025 revenue was $614.5M, up 34% year-over-year (YoY) (CEO, CFO, prepared).
• Large customers (>$100k/year) reached 4,298, up 23% YoY; revenue from this cohort grew 42% YoY and represented 73% of total revenue (up from 69% in Q4 2024) (CEO, CFO, prepared).
• Dollar-based net retention rate was 120%, up 1% QoQ and 9% YoY (CEO, CFO, prepared).
• Gross margin was 74.9%, down 40 bps QoQ and 270 bps YoY (CFO, prepared).
• Operating income of $89.6M, operating margin of 14.6% (CEO, CFO, prepared).
• Free cash flow (FCF) of $99.4M, or 16% of revenue, compared to $47.8M (10% of revenue) in Q4 2024 (CEO, CFO, prepared).
• Remaining performance obligations (RPO) of $2.496B, up 48% YoY; current RPO 63% of total (CFO, prepared).
• Network CapEx was 13% of revenue in Q4; FY2026 network CapEx expected to be 12%–15% of revenue (CFO, prepared).
• New ACV in Q4 grew nearly 50% YoY (fastest growth rate since 2021) (CEO, prepared).
• Record deal: largest annual contract value (ACV) deal of $42.5M per year (CEO, prepared).
• Record total contract value (TCV) deal earlier in the year: $130M over five years (CEO, prepared).

Official Guidance (CFO, prepared):

• Q1 2026: Revenue $620M–$621M (29%–30% YoY growth); operating income $70M–$71M; diluted EPS $0.23 (~377M shares).
• Full Year 2026: Revenue $2.785B–$2.795B (28%–29% YoY growth); operating income $378M–$382M; diluted EPS $1.11–$1.12 (~377M shares).

Mgmt Quotes (CEO, prepared):

1. "Our go-to-market engine is firing on all cylinders."
2. "This deal is a testament to our shift from being just a vendor to instead being a strategic co-innovation partner for the world's most sophisticated AI companies."
3. "We didn't just replace three incumbents; we replaced a legacy mindset, proving once again when you give developers the best tools, the entire enterprise follows."
4. "What we're witnessing is a fundamental replatforming of the Internet."
5. "If AI agents are the new users of the Internet, Cloudflare is the platform they run on and the network they pass through."

Prepared Metrics

Q&A Batch (1-5 of 8)

Q1 — Matt Hedberg

• Topic: AI agents impact on Cloudflare and CapEx efficiency vs hyperscalers
• Key points:

  • 20% of the Internet sits behind Cloudflare, giving it a seat at the table for defining agentic commerce rules/rails/guardrails.

  • Cloudflare charges only for actual work done, achieving up to 10x the work off the same GPU vs hyperscalers.
  • CapEx has ticked up slightly due to Workers demand, but is "nowhere close" to hyperscaler levels.
• Mgmt stance: Bullish — CEO sees Cloudflare as "perfectly positioned" and "Goldilocks" business model, with AI agents driving more need for Cloudflare services.

Q2 — Keith Weiss

• Topic: Evolution of Internet traffic, role of acquisitions (Humenated, ASTRO) in future business model
• Key points:
  • Humenated (ex-Google team) is helping define the next Internet business model, moving away from ads/subscriptions.
  • ASTRO is a developer platform/framework powering "vibe coding" systems and next-gen web applications.
  • Cloudflare can rewrite content flowing through it (e.g., from English to Latin) to adapt to agent preferences.
• Mgmt stance: Bullish — CEO emphasizes Cloudflare's ability to bring legacy Internet along via one-click simplicity, with partnerships (Shopify, Visa, PayPal, Mastercard) to support small businesses in agentic commerce.

Q3 — Jonathan Ho

• Topic: Examples of companies using Cloudflare Workers for AI projects, competitive advantages vs hyperscalers
• Key points:
  • Fortune 500 pharma built a vibe coding platform on Cloudflare using OrchestraAI and DurableObjects for internal AI tools.
  • A publicly traded tech company migrated plug-in sandbox infrastructure to Cloudflare containers for secure, isolated code execution.
  • A leading financial services company launched an MCP server on Workers for AI agents to manage payment services via natural language.
• Mgmt stance: Bullish — CEO highlights complete toolkit, modern architecture, and cost-effectiveness (scale up/down to zero, no 1-year GPU lease commitment) as key differentiators.

Q4 — Gabriela Borges

• Topic: Large deal pipeline and learnings from $100M+ deals
• Key points:
  • Pipeline is "incredibly strong," driven by existing customers, embedded developers, and identifying opportunities to replace hyperscaler spend.
  • Large deals come from customers realizing Cloudflare offers faster, more scalable, and more cost-effective solutions.
  • CEO states "we're still not up to a point where we're going to be doing a $100 million deal a quarter, but we will get to that point."
• Mgmt stance: Bullish — CEO sees enormous TAM for Workers platform and expects more spend shift away from hyperscalers.

Q5 — Fatima Boolani

• Topic: Pool of funds traction and revenue variability from usage-oriented revenue
• Key points:
  • Pool of funds was ~20% of ACV booked in Q4 2025, up from mid-teens for all of 2025.
  • Higher pool-of-funds share increases variable revenue, creating expected volatility (sequentially bigger Q4s, smaller Q1s vs linear deals).
  • Pool of funds still represents a "relatively low percentage of revenue, although growing quickly."
• Mgmt stance: Neutral — CFO acknowledges volatility from variable revenue but notes guidance attempts to compensate; CEO sees long runway for pool-of-funds growth.

Q&A Batch (6-8 of 8)

Q6 — Gray Powell

• Topic: AI-driven demand for core application services (act one) and Zero Trust (act two)
• Key points:
  • AI companies initially drove demand for security/load management (bot detection) as queries are expensive to process.
  • In Q4, traditional companies (media, e-commerce) saw an "enormous uptick" in agent interactions, increasing query volume by an "order of magnitude."
  • Self-service Zero Trust products saw a "real uptick" from home users running personal agents, though not yet large revenue.
• Mgmt stance: Bullish — AI is a "tailwind" for both legacy products (application services, Zero Trust) and developer tools, with no pressure on Cloudflare.

Q7 — Shrenik Kotauri

• Topic: Act four AI crawl control and content marketplace model
• Key points:
  • Cloudflare signed a $3.1 million contract with a media company for AI crawl control.
  • 80% of AI companies use Cloudflare; calls from banks (research teams) and major publishers (AP, BBC, New York Times) about protecting intellectual property from AI bots.
  • Cloudflare positions as a "neutral, honest broker" between AI companies and content creators, unlike hyperscalers (Microsoft, Amazon) with conflicting incentives.
• Mgmt stance: Bullish — 2026 will be the time to discuss the financial impact of the future business model; focus on ensuring content creators get paid by AI companies.

Q8 — Adam Borg

• Topic: Channel mix and go-to-market priorities for 2026
• Key points:
  • Channel mix reached 28.5% in Q4 2025, with ongoing momentum.
  • In 2025, Cloudflare published a price list for channel partners to quote deals independently, simplifying the process.
  • At the 2026 sales kickoff in Las Vegas, partners expressed readiness to "sell the hell out of Cloudflare's products."
• Mgmt stance: Bullish — Channel makes the company "more nimble, not less"; both direct sales and channel vectors are being accelerated independently, with full-speed hiring and ramping.