Computed from published fixed rules, not a model's judgement — though one input, the count of high-severity risks, comes from the AI analysis below.
Not investment advice and not a price target: it scores the quarter's fundamentals, not the stock. Full methodology →
AI Takeaway
Cloudflare's Q2 FY2026 results reflect the early stages of a pivot to an AI-first operating model, as a restructuring reduced 20% of its workforce and incurred $150.7 million in charges. The company's dollar-based net retention rate improved to 120%, signaling strong expansion within existing accounts, while the number of large customers—those generating over $100,000 in annualized revenue—grew 26.5% year-over-year. Revenue growth remained robust at 35.9%, but the heavy restructuring costs led to a significant net loss and a contraction in GAAP operating margin. The success of this strategic shift depends on realizing productivity gains from AI and automation while maintaining customer acquisition and retention momentum.
Revenue
$696.06M
+35.87% YoY
EPS (Diluted)
-$0.48
-220.00% YoY
Gross Margin
71.8%
-3.1 pts YoY
Operating Income
-$205.7M
-205.80% YoY
Source: SEC XBRL
Cloudflare (NET) reported Q2 FY2026 revenue of $696.06M, up 35.9% year over year. Operating margin was -29.6%, against -13.1% a year earlier. NET's fiscal Q2 FY2026 corresponds to calendar Q2 2026.
Last 4 quarters: 4 beats
| Quarter | Actual EPS (USD) | Consensus (USD) | Result |
|---|---|---|---|
| Mar 2026 | 0.25 | 0.24 | Beat +6.2% |
| Dec 2025 | 0.28 | 0.27 | Beat +2.4% |
| Sep 2025 | 0.27 | 0.24 | Beat +14.2% |
| Jun 2025 | 0.21 | 0.19 | Beat +13.3% |
Compiled by AI from 10-Q Item 2 of this filing
On May 7, 2026, Cloudflare announced a plan to accelerate its evolution to an agentic AI-first operating model, reducing approximately 20% of its workforce. Total estimated restructuring charges are up to $165 million, with $150.7 million recognized in Q2 FY2026, primarily in cash severance and stock-based compensation.
Source: 10-Q Item 2 MD&A
Non-GAAP income from operations reached $96.1 million with a non-GAAP operating margin of 14%, unchanged from the prior-year period, as the company adds back stock-based compensation, restructuring charges, and other items.
Source: 10-Q Item 2 MD&A
The dollar-based net retention rate improved to 120% from 114% a year ago, indicating stronger expansion of recurring revenue from existing paying customers.
Source: 10-Q Item 2 MD&A
The number of paying customers with annualized revenue greater than $100,000 grew to 4,698 from 3,712 in the prior-year quarter, an increase of 26.5%.
Source: 10-Q Item 2 MD&A
Management continues to monitor the impact of U.S. tariffs and global geopolitical tensions, which may lengthen sales cycles, slow new customer acquisition, increase customer churn, and raise equipment costs.
Source: 10-Q Item 2 MD&A
Compiled by AI from 10-Q Item 1A of this filing · 4 high, 1 medium, 0 low
Cloudflare has incurred net losses in every period since inception, including a net loss of $170.0 million in Q2 FY2026, and held an accumulated deficit of $1.3978 billion. Rising operating expenses may prevent the company from achieving or sustaining profitability.
Source: 10-Q Item 1A Risk Factors
The company's 35.9% YoY revenue growth in Q2 FY2026 may not be indicative of future performance. Growth rates have periodically slowed, and increasing costs could outpace revenue gains, impairing the ability to forecast future results.
Source: 10-Q Item 1A Risk Factors
The recent workforce reduction and increased reliance on AI and automation tools may not deliver expected productivity gains. Operational disruptions, reputational harm, and regulatory scrutiny around AI could negatively impact customer retention, hiring, and internal controls.
Source: 10-Q Item 1A Risk Factors
Imposition of U.S. and retaliatory tariffs could raise equipment costs and reduce customer spending. Economic downturns, rising interest rates, or geopolitical conflicts may lengthen sales cycles, accelerate customer churn, and slow new customer acquisition.
Source: 10-Q Item 1A Risk Factors
Failure to effectively sell to large enterprises—who often have longer evaluation periods and greater bargaining power—could hinder growth. Loss of key large customers or inability to expand within their accounts would materially harm revenue and profitability.
Source: 10-Q Item 1A Risk Factors
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Revenue $M | 696.06 $M | 512.32 $M | +35.87% |
Cost of Revenue $M | 196.54 $M | 128.68 $M | +52.74% |
Gross Profit $M | 499.52 $M | 383.64 $M | +30.20% |
Operating Income $M | -205.70 $M | -67.26 $M | -205.80% |
Net Income $M | -169.98 $M | -50.45 $M | -236.96% |
EPS (Basic) $ | -0.48 $ | -0.15 $ | -220.00% |
EPS (Diluted) $ | -0.48 $ | -0.15 $ | -220.00% |
R&D Expense $M | 159.49 $M | 134.56 $M | +18.53% |
Answers draw on this SEC filing and the data on this page
Expected release date, analyst estimates & what to watch
Cloudflare (NET) delivered strong Q1 2026 revenue growth of 33.5% YoY to $639.8M, while narrowing its net loss to $22.9M and maintaining positive operating cash flow of $158.3M, though gross margin compressed 4.7 percentage points to 71.2%.
Cloudflare (NET) delivered strong FY2025 revenue growth of 29.8% to $2.17B, but operating losses widened to -$207.2M as cost of revenue surged 45.9%, while a large financing raise boosted cash to $943.5M and total assets grew 82.9%.