ANV

By Christine Ji

Demand for automated AI protection is on the rise - and manifesting in Cloudflare's earnings results

Cloudflare set new records for number of customers added this quarter and in the past year.

Cloudflare shares rocketed more than 15% in extended trading Thursday after a blowout earnings report helped reverse sour sentiment.

Fueled by demand for artificial-intelligence cybersecurity solutions, Cloudflare's (NET) third-quarter revenue grew 39% from a year before to hit $782.5 million. That amounted to the fastest growth rate in nearly four years. Adjusted earnings came out to 38 cents per share.

Wall Street consensus estimates were tracking $737.2 million and 34 cents, respectively.

The web infrastructure and security firm inspects pnline traffic, helps sites load quickly and acts as a tollbooth for AI bots. Cloudflare operates a globally distributed network instead of centralized data centers, meaning that the company can inspect web traffic and block threats closer to where users are. The approach is more cost-effective than that of hyperscalers and neoclouds, Cloudflare said on the earnings call.

In the earnings release, CEO Matthew Prince cited an acceleration in enterprise customer demand. During the quarter, Cloudflare crossed the threshold of $3 billion in annualized revenue.

Shares of Cloudflare had fallen 8% during Thursday's trading session as cybersecurity stocks sold off upon broader market weakness and AI competition. But Cloudflare's earnings showed that customers are flocking to the company to protect their data from agentic threats, which have increased in severity in recent weeks.

Since the beginning of July, Cloudflare has added roughly 5% of the entire global web to its network, more than the combined market footprint of all its direct web-routing rivals, Prince said. "We've partnered with nearly every major frontier AI lab and security company searching for flaws in existing software."

Cloudflare brought in 308 large customers during the quarter and nearly 1,000 over the past year, setting fresh company records for customer additions on both a quarterly and annual basis.

The company has been able to scale its business while reducing costs. Operating expenses, the day-to-day costs of running the business, came out to 55% of revenue, falling by over 5 percentage points relative to a year before.

For the fourth quarter, the company projected revenue between $845 million and $846 million and adjusted earnings of 43 cents per share. That surpassed Wall Street estimates for $796 million in revenue and 38 cents per share.

-Christine Ji

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11-05-26 1850ET