NET · Cloudflare, Inc.

Cloudflare delivered strong Q1 2026 results with revenue growth of 34% to $639.8 million, driven by AI-related demand as highlighted by CEO Matthew Prince, who noted AI as the biggest tailwind in company history. GAAP gross margin contracted to 71.2% from 75.9% YoY due to cost of revenue scaling, while non-GAAP margin was 72.8%. Operating expenses rose significantly, with sales & marketing up to $271.6M and R&D at $151.0M, reflecting investment in AI innovation, leading to GAAP operating loss widening slightly to $62.0M but non-GAAP operating income improving to $73.1M. Net loss narrowed to $22.9M from $38.5M, with non-GAAP net income more than doubling to $94.0M. Cash generation strengthened, with operating cash flow at $158.3M and free cash flow at $84.1M (13% of revenue). Concurrently, the company announced a restructuring to accelerate its shift to an agentic AI-first operating model, planning to cut ~20% of workforce (1,100 people), incurring $140-150M charges ($105-110M cash, $35-40M non-cash), mostly in Q2 with completion by Q3 end. Guidance signals continued momentum: Q2 revenue $664-665M (4% sequential growth), FY2026 revenue $2.8B+, non-GAAP op income $418-421M. This positions Cloudflare for AI-driven efficiency gains despite near-term restructuring costs, with robust $4.2B liquidity supporting execution.