Cloudflare reported a modest beat in Q1 with revenues rising 30.5% year-over-year to $378.6 million, slightly ahead of their projected $373 million. Despite this, they maintained their full-year guidance, attributing the decision to broader macroeconomic concerns rather than internal company performance. This conservative outlook is reflected in their expectation of a reduced growth rate for the second half of the year at 26.5%, compared to 28.1% in the first half.
The company continues to show robust key financial metrics with no significant indicators of business issues. The growth in paying customers and customers with annual revenues exceeding $100,000 shows healthy expansion, while their Remaining Performance Obligations (RPO) grew 40% year-over-year, indicating strong future revenue potential.
Adjusted earnings per share (EPS) doubled to $0.16, surpassing estimates significantly, but GAAP results revealed a wider operating loss year-over-year, reflecting challenges in achieving GAAP profitability amid high stock-based compensation expenses. The company emphasized growth in high-margin products like Zero Trust and SASE, which aid gross margin expansion.
Management’s commentary on the earnings call highlighted cautious optimism, attributing the restrained future outlook to unpredictable macroeconomic conditions despite strong internal performance indicators. They also discussed their efficient capital expenditure strategy, particularly in deploying GPU capacity, which supports their competitive position against larger hyperscalers with more significant capital resources.
Overall, Cloudflare appears strategically positioned for medium-term success, especially in AI inference at the edge, despite current market uncertainties and conservative financial projections for the latter half of the year.