Cloudflare Revenue Jumps 39% to $782.5 Million in Third Quarter
Key Facts
Cloudflare said third-quarter 2026 revenue was $782.5 million, up 39% year over year, for the quarter ended Sept. 30. Chief Executive Matthew Prince said the company posted its fastest revenue growth in nearly 4 years and surpassed $3 billion in annualized revenue. The results showed a widening gap between sales growth and accounting profitability, as the company reported a GAAP operating loss rather than operating income. By contrast, non-GAAP operating income rose and its margin improved from a year earlier. The company issued guidance for the fourth quarter and fiscal year, including revenue and non-GAAP operating income.
Revenue growth accelerated from the second quarter of 2026, when revenue was $696.1 million, up 36% year over year. The company reported revenue of $2,167.9 million for fiscal 2025, an increase of 29.8% from the prior year. Prince said third-quarter revenue was $782 million and annual growth reached 39%, adding: "We recorded our fastest revenue growth in nearly 4 years." He also said the company surpassed $3 billion in annualized revenue. The figures reflect a higher growth pace than in the previous period, while profit and loss results remain mixed depending on the accounting measure used.
On a GAAP basis, the operating loss was $67.9 million, or 8.7% of revenue, compared with a loss of $37.5 million and a loss margin of 6.7% in the third quarter of 2025. GAAP net loss also widened to $34.1 million from $1.3 million in the year-earlier period, while non-GAAP net income was $143.7 million. On a non-GAAP operating basis, the company reported income of $137.1 million, or 17.5% of revenue, compared with $85.9 million and 15.3% a year earlier. The comparison shows improvement in adjusted operating income alongside wider losses under generally accepted accounting principles. Revenue growth alone therefore does not capture the full picture of the quarter's results.
Gross margins declined from year-earlier levels despite an increase in gross profit in dollar terms. The GAAP gross margin was 71.2%, compared with 74.0% in the third quarter of 2025, while the non-GAAP margin was 72.4%, down from 75.3%. Cash flow from operations was $215.4 million, compared with $167.1 million a year earlier. Free cash flow rose to $82.1 million from $75.0 million, but its share of revenue fell to 10% from 13%. The results thus show an increase in cash generated from operations and free cash flow in absolute terms, alongside a lower free cash flow margin as a share of sales.
Current remaining performance obligations, which reflect future contracted revenue, grew 37% year over year in the third quarter. The company also held $5,128.7 million in cash and equivalents and available-for-sale securities as of Sept. 30, 2026. These contractual and financial indicators provide additional context alongside quarterly revenue, without changing the divergence between gross margins and operating income measures. The reported results did not identify a specific reason for the revenue acceleration, so the company does not attribute the growth in these figures to a particular segment or product. Cloudflare shares had risen more than 14% in premarket trading on Friday, Nov. 6, following the results and guidance.
Cloudflare forecast fourth-quarter fiscal 2026 revenue of $845.0 million to $846.0 million and non-GAAP operating income of $156.0 million to $157.0 million. For full-year fiscal 2026, it set a revenue range of $2,963.0 million to $2,964.0 million and non-GAAP operating income of $462.0 million to $463.0 million. The guidance follows third-quarter revenue of $782.5 million, while the future operating income figures are based on a non-GAAP measure. The company has set numerical ranges for the next quarter and the full fiscal year, as third-quarter results still showed a GAAP operating loss. The fourth quarter is the next period that will show how closely results approach the announced ranges.