Cloudflare Inc Earnings - Q4 2025 Analysis & Highlights
Cloudflare reported strong Q4 2025 results with accelerating revenue growth, record new ACV bookings, and significant enterprise customer expansion, while positioning itself as a critical infrastructure provider for the emerging agentic internet and AI-driven workloads.
Key Financial Results
Q4 2025 revenue reached $614.5 million, representing 34% year-over-year growth and accelerating for the third consecutive quarter.
Dollar-based net retention was 120%, up 1% quarter-over-quarter and 9% year-over-year.
Gross margin was 74.9%, just below the long-term target range of 75% to 77%.
Operating profit was $89.6 million, representing an operating margin of 14.6%.
Free cash flow was $99.4 million during the quarter, or 16% of revenue, compared to $47.8 million or 10% of revenue in the same period last year.
Net income in the quarter was $106.8 million or diluted net income per share of $0.28.
New ACV bookings grew nearly 50% year-over-year, representing the fastest growth rate since 2021 and a record quarter in absolute ACV dollars.
Business Segment Results
The company operates across four Acts: Act 1 (Application Services), Act 2 (Zero Trust), Act 3 (Developer Platform/Workers), and Act 4 (future business models).
Revenue from large customers (those paying over $100,000 per year) grew 42% year-over-year and contributed 73% of revenue in the quarter, up from 69% in Q4 2024.
The company ended the quarter with 4,298 customers paying more than $100,000 per year, up 23% year-over-year.
The company ended the year with 269 customers that spent over $1 million, representing a 55% increase year-over-year and a record addition of 96 such customers in 2025.
Total paying customers reached approximately 332,000, representing a record sequential addition of nearly 37,000 paying customers and a 40% year-over-year increase.
Workers developer platform delivered outsized growth and is driving significant adoption among developers and enterprises.
Geographic performance: US represented 49% of revenue and increased 31% year-over-year; EMEA represented 27% of revenue and increased 31% year-over-year; APAC represented 16% of revenue and increased 50% year-over-year.
Capital Allocation
Network CapEx represented 13% of revenue in the fourth quarter.
The company expects network CapEx to be 12% to 15% of revenue for full year 2026.
The company ended the fourth quarter with $4.1 billion in cash, cash equivalents, and available-for-sale securities.
Remaining performance obligations (RPO) came in at $2.496 billion, representing an increase of 16% sequentially and 48% year-over-year.
Current RPO was 63% of total RPO and grew 34% year-over-year.
Industry Trends and Dynamics
AI agents are driving a fundamental replatforming of the internet, with agents generating an order of magnitude more outbound requests to the web than traditional user-driven applications.
Over the month of January alone, the number of weekly requests generated by AI agents more than doubled across the Cloudflare network.
The industry is transitioning from a business model defined by seat licenses to one where the winners are those providing the compute, connectivity, and rails and guardrails for digital workers at scale.
Most so-called vibe coding platforms are either built on Cloudflare Workers or have Cloudflare as their preferred deployment target.
Cloudflare exited 2025 with more than 4.5 million human developers active on its platform.
Cloudflare is ranked the number one cloud platform in the latest Stack Overflow survey for developers learning to code.
More than 20% of the web already sits behind Cloudflare's network, making it effectively the global control plane for the agentic internet.
Competitive Landscape
Cloudflare is positioned as a non-negotiable linchpin of the modern technology stack, with vendors being sorted between nice-to-haves and must-haves.
The most sophisticated AI companies are choosing Cloudflare as their mission-critical, independent platform to connect, protect, and build the future of the AI-driven internet.
Cloudflare is winning deals against major hyperscalers by offering unified stack, rapid innovation, and strategic neutrality.
The company is displacing legacy incumbents and hyperscalers by offering superior performance, engineering innovation, extensibility of the Workers developer platform, and ability to fill critical gaps in the hyperscaler model.
Cloudflare is positioned as a trusted, neutral third-party broker between AI companies and content creators, which competitors like hyperscalers cannot replicate due to their own foundational model incentives.
Global sales productivity increased year-over-year for the eighth consecutive quarter, surpassing the all-time high productivity set in Q4 2021.
The sales team achieved the highest quota attainment in the last four years.
Macroeconomic Environment
The company noted that there has been a volatile start to 2026 from a tech perspective, with hyperscalers being punished for increased CapEx spending and SaaS vendors being punished for AI disruption concerns.
Management expressed confidence that Cloudflare is well-positioned for the current macroeconomic environment and AI-driven changes, with the CEO stating he would not trade places with any other CEO.
Growth Opportunities and Strategies
The company has successfully transitioned from product-led growth to true enterprise sales, with the go-to-market engine firing on all cylinders.
Year-over-year growth in net sales capacity increased at the fastest pace since 2022.
For the fifth consecutive quarter, the company added a record number of customers that spend over $1 million per year.
The company closed the largest annual contract value deal in its history at $42.5 million per year in Q4 2025.
The company signed its largest total contract value deal in history at $130 million over five years at the start of the year.
Pool of funds contracting represented about 20% of ACV in the fourth quarter and mid-teens for all of 2025, representing customer trust and commitment to Cloudflare's platform.
The company is expanding channel partnerships, with channel mix ticking up to over 28.5%, and has made it easier for channel partners by publishing price lists and simplifying the quoting process.
Cloudflare is developing Act 4 business opportunities focused on helping invent the future business model of the internet, including AI Crawl Control and content marketplace models.
The company acquired Human Native and Astro to support its vision of the future internet business model and next-generation web development.
Cloudflare is working with companies like Shopify, Visa, PayPal, and Mastercard to ensure small businesses are supported in an agentic commerce world.
The company is positioned to capture value on both sides of agentic interactions through Workers developer platform adoption and increased usage of all products driven by the agentic internet.
Financial Guidance and Outlook
For Q1 2026, the company expects revenue in the range of $620 million to $621 million, representing an increase of 29% to 30% year-over-year.
For Q1 2026, the company expects operating income in the range of $70 million to $71 million.
For Q1 2026, the company expects diluted net income per share of $0.23, assuming approximately 377 million shares outstanding.
For full year 2026, the company expects revenue in the range of $2.785 billion to $2.795 billion, representing an increase of 28% to 29% year-over-year.
Revenue for full year 2026 is anticipated to be weighted 46% in the first half of the fiscal year.
For full year 2026, the company expects operating income in the range of $378 million to $382 million.
For full year 2026, the company expects diluted net income per share in the range of $1.11 to $1.12.
The company expects an effective tax rate of 20% for both Q1 2026 and full year 2026.
The company is comfortable with consensus free cash flow estimates for 2026.
Management has visibility into multiple independent growth vectors that give confidence in the ability to continue executing against the winning formula of durable revenue growth while maintaining strong unit economics.
AI and Agentic Internet Opportunity
Cloudflare was built for the moment of the agentic internet, with unique architecture to capture value on both sides of agentic interactions.
When the cost of generating code drops to near zero, the volume of new applications explodes, driving demand for Cloudflare's platform.
Developers are using Workers to run autonomous logic across Cloudflare's global network, including containers for sandboxes and AI gateway to manage inference with caching, rate limiting, and observability.
AI usage is driving adoption of Cloudflare's Zero Trust platform to ensure data is compartmentalized and access is granted in limited and controlled ways.
Agentic workloads are generating an order of magnitude more outbound requests to the web than traditional user-driven applications, driving increased demand for Cloudflare's whole platform.
The company's scale with more than 20% of the web behind its network creates a virtuous flywheel where more agents drive more code execution on Workers, which drives more demand for performance, security, and networking services.
Content Creator and AI Company Relationships
Cloudflare is acting as a neutral honest broker between AI companies and content creators to establish a sustainable business model for the internet.
Content creators including major publishers, banks, and research teams are seeking ways to monetize their content as AI companies consume their data.
The company has received overwhelmingly positive reactions from content creators regarding AI Crawl Control and content marketplace concepts.
Both AI companies and content creators prefer Cloudflare as the trusted, neutral third-party to define the future business model rather than hyperscalers with their own foundational model incentives.
