Summary
Cloudflare reported first quarter fiscal 2025 revenue of $479.1 million, up 27% from the prior-year quarter. New paying customers and expansion within the existing base both contributed. Gross profit was $363.5 million. Gross margin slipped to 75.9% from 77.5% in the first quarter of 2024. Cost of revenue rose 36% to $115.6 million, reflecting $10.4 million more in co-location, network and bandwidth costs, $10.1 million more in third-party technology services, and $9.2 million more in depreciation as server acquisitions and deployments grew. On a non-GAAP basis, gross profit was $369.3 million, a 77.1% margin, against $301.1 million and 79.5% a year earlier.
GAAP profitability is still negative, but the operating loss narrowed. The loss from operations was $53.2 million, or 11.1% of revenue, compared with $54.6 million, or 14.4% of revenue, in the first quarter of 2024. Net loss widened to $38.5 million from $35.5 million, and GAAP net loss per diluted share widened to $0.11 from $0.10. Total non-operating income, net fell to $16.5 million from $21.3 million as other income (expense), net swung to negative $3.5 million from positive $1.1 million. Non-GAAP income from operations was $56.0 million, or 11.7% of revenue, up from $42.4 million, or 11.2%. Non-GAAP net income was $58.4 million against $58.2 million, and non-GAAP net income per diluted share was $0.16 in both quarters. Stock-based compensation and related employer payroll taxes reached $105.9 million, up from $76.7 million.
Cash generation improved sharply. Operating cash flow was $145.8 million for the quarter, up from $73.6 million a year earlier. Free cash flow, which Cloudflare defines as net cash provided by operating activities less purchases of property and equipment and capitalized internal-use software, was $52.9 million, or 11% of revenue, compared with $35.6 million, or 9%. Capital expenditures were $85.9 million, up from $32.1 million. Deferred revenue, current portion, ended the quarter at $508.1 million, up 42.6% year over year. Remaining performance obligations were $1.86 billion, up 38.8% from $1.34 billion a year earlier. Cash, cash equivalents and available-for-sale securities totaled $1,914.9 million as of March 31, 2025.
The customer base kept expanding. Paying customers reached 250,819 at March 31, 2025, up from 197,138 a year earlier. Customers with more than $100,000 of annualized revenue numbered 3,527, compared with 2,878. Dollar-based net retention was 111%, down from 115%. Management pointed to the largest contract in Cloudflare's history, a deal worth more than $100 million driven by the Workers developer platform, and the longest-term SASE contract signed to date. The company also reported its highest year-over-year growth in net new ACV in three years. International markets produced 51% of revenue, up from 48%.
Guidance for the second quarter of fiscal 2025 calls for non-GAAP income from operations of $62.5 million to $63.5 million and non-GAAP net income per share of $0.18 on roughly 364 million weighted average shares. For the full fiscal year 2025, Cloudflare guides to non-GAAP income from operations of $272.0 million to $276.0 million and non-GAAP net income per share of $0.79 to $0.80. Risks include tariffs on equipment imported into the United States, which management is still assessing for the impact on capital expenditures. The company also carries an accumulated deficit of $1,141.1 million, warns that sales cycles, pipeline conversion and churn could worsen, and holds $1,293.8 million in aggregate principal of 0% convertible notes due 2026, with no loans drawn on its $400.0 million revolving credit facility as of March 31, 2025.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2025 | Q4 FY2024 | QoQ | Q1 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $479.1M | $459.9M | +4.2% | $378.6M | +26.5% |
| Gross profit | $363.5M | $351.3M | +3.5% | $293.6M | +23.8% |
| Gross margin | 75.9% | 76.4% | -0.5 pp | 77.5% | -1.7 pp |
| Research & development | $115.1M | $120.2M | -4.3% | $87.7M | +31.2% |
| Sales & marketing | $214.0M | $192.0M | +11.5% | $194.1M | +10.3% |
| General & administrative | $87.7M | $73.8M | +18.8% | $66.3M | +32.2% |
| Total operating expenses | $416.8M | $386.0M | +8.0% | $348.1M | +19.7% |
| Operating income (loss) | -$53.2M | -$34.7M | -53.4% | -$54.5M | +2.4% |
| Operating margin | -11.1% | -7.5% | -3.6 pp | -14.4% | +3.3 pp |
| Net income (loss) | -$38.5M | -$12.8M | -199.3% | -$35.5M | -8.2% |
| Net margin | -8.0% | -2.8% | -5.2 pp | -9.4% | +1.4 pp |
| Diluted EPS | -$0.11 | -$0.04 | -$0.07 | -$0.10 | -$0.01 |
| Net retention rate | 111.0% | 111.0% | ±0.0 pp | 115.0% | -4.0 pp |
Risks
MD&A states U.S. tariffs and retaliatory measures may increase costs of network equipment and that macroeconomic uncertainty could persist during 2025. It has periodically experienced lengthening sales cycles, pipeline slowdowns, higher churn, and longer payment timing, which may have contributed to a slowdown in revenue growth.
Risk factors state that since the first half of 2022, the average sales cycle for new and existing large customers has periodically lengthened. Large enterprise evaluations and pool-of-funds contracts make it difficult to predict when sales close and when revenue is recognized.
Growth strategy depends on attracting, expanding, and retaining large customers, which have longer sales cycles, greater pricing leverage, early termination rights, and pool-of-funds arrangements that do not require specific monthly, quarterly, or annual spend. Losing or reducing a large customer could cause significant quarterly variability.
Competition is increasing as new products and technologies, including those leveraging AI and machine learning, are introduced. Large public cloud and telecommunications competitors could bundle competing products or sell at zero or negative margins, and MD&A notes investments in GPU servers for AI-related developer platform products.
Risk factors state that since late 2022 the company periodically experienced reduced average productivity among sales personnel, partly because new hires did not become as productive as expected. It must attract, train, and retain sales personnel, including for newer Zero Trust and Cloudflare Developer Platform products.
Company has incurred net losses in all periods since inception; net loss was $38.5 million for the three months ended March 31, 2025 and $35.5 million for the three months ended March 31, 2024, and accumulated deficit was $1,141.1 million as of March 31, 2025. It expects operating expenses to increase over the next several years.
As of March 31, 2025, $1,293.8 million aggregate principal of the 2026 Notes remained outstanding, and the $400 million Revolving Credit Facility contains restrictive covenants. Conversion or a fundamental change could require cash settlement and cause dilution.
Use of the network by customers such as The Daily Stormer, 8chan, and Kiwi Farms has caused significant negative publicity, and some potential customers decided not to subscribe. Actions to ban such customers also drew adverse feedback.
The vast majority of customers do not pay, and a substantial majority of free customers historically have not converted to paying customers. The company bears incremental expenses and liabilities, including litigation, for free users.
SaaS KPIs
All quarters →Dollar-Based Net Retention Rate
Free Cash Flow Margin
Paying customers
Non-GAAP Operating Margin
Paying Customers (> $100,000 Annualized Revenue)
Free Cash Flow
Non-GAAP Income from Operations
Summary, forecast, risks and KPIs are extracted from Cloudflare, Inc.'s SEC filings for Q1 FY2025 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.