Summary
Cloudflare reported $430.1 million of revenue in its fiscal 2024 third quarter, up 28% from $335.6 million a year earlier. The nine-month total reached $1.21 billion, up 29.5% from $934.3 million. Management credited new paying customers and expansion within existing accounts. Paying customers rose 22% to 221,540 as of September 30, 2024, and the company added a record 219 large customers. Accounts with more than $100,000 of annualized revenue totaled 3,265, up from 2,558. International markets produced 50% of revenue in the quarter, up from 48% a year earlier. Dollar-based net retention was 110%, compared with 116% a year earlier. The base keeps growing, but expansion within it is slower than it was a year ago.
Gross profit was $334.1 million, up 29.7%, and gross margin was 77.7% against 76.7%. The GAAP loss from operations narrowed to $30.8 million, or 7.2% of revenue, from $39.2 million, or 11.7% of revenue. Net loss narrowed to $15.3 million from $23.5 million, and diluted loss per share was $0.04 against $0.07. Non-GAAP income from operations was $63.5 million, or 14.8% of revenue, compared with $42.5 million, or 12.7%. Non-GAAP net income was $72.6 million and non-GAAP diluted net income per share was $0.20, against $55.3 million and $0.16. The distance between the two sets of numbers stays wide. Stock-based compensation and related employer payroll taxes totaled $91.8 million in the quarter. Headcount grew in every function, up 11% in sales and marketing, 29% in research and development, and 19% in general and administrative.
Cash generation improved. Operating cash flow was $104.7 million, up 53.8% from $68.1 million, while capital expenditures were $50.2 million, up 84.0% from $27.3 million. Free cash flow, defined as operating cash flow less purchases of property and equipment and capitalized internal-use software, was $45.3 million, or 11% of revenue, against $34.9 million, or 10%. Through nine months, operating cash flow was $253.1 million, up 49.8% from $169.0 million. Deferred revenue, current portion only, was $389.8 million, up 32.5%. Remaining performance obligations were $1.50 billion, up 38.8%. Cash, cash equivalents, and available-for-sale securities stood at $1,823.8 million on September 30, 2024, and the accumulated deficit was $1,089.8 million. No loans were outstanding under the $400.0 million revolving credit facility as of September 30, 2024.
Guidance for the fourth quarter of fiscal 2024 calls for revenue of $451.0 million to $452.0 million, non-GAAP income from operations of $57.0 million to $58.0 million, and non-GAAP net income per share of $0.18 on roughly 360 million weighted average shares. For the full fiscal year 2024, the company guides to revenue of $1,661.0 million to $1,662.0 million, non-GAAP income from operations of $220.0 million to $221.0 million, and non-GAAP net income per share of $0.74 on about 357 million shares. Non-GAAP income from operations was $162.9 million through the first nine months.
Risks are familiar and unresolved. Cloudflare has a history of net losses and expects to keep incurring operating losses, with cash flow that may swing between positive and negative. Management pointed to macroeconomic uncertainty, inflation, high interest rates, and geopolitical tension in the Middle East and Ukraine. It also described periodic lengthening of sales cycles, slower conversion of pipeline into sales, higher churn in the paying base, and longer payment timing from some customers. Capital expenditures are rising faster than revenue. A change in the estimated useful life of servers, extended from four years to five, reduced depreciation expense by $16.8 million over the nine months and is expected to reduce it by about $20 million for the full fiscal year 2024. The balance sheet carries $1,286.3 million of convertible senior notes, net.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $430.1M | $401.0M | +7.3% | $335.6M | +28.2% |
| Gross profit | $334.1M | $312.0M | +7.1% | $257.5M | +29.7% |
| Gross margin | 77.7% | 77.8% | -0.1 pp | 76.7% | +1.0 pp |
| Research & development | $110.9M | $102.5M | +8.2% | $90.6M | +22.4% |
| Sales & marketing | $185.2M | $174.5M | +6.1% | $150.2M | +23.3% |
| General & administrative | $68.8M | $69.6M | -1.2% | $55.9M | +22.9% |
| Total operating expenses | $364.9M | $346.7M | +5.3% | $296.7M | +23.0% |
| Operating income (loss) | -$30.8M | -$34.7M | +11.3% | -$39.2M | +21.5% |
| Operating margin | -7.2% | -8.7% | +1.5 pp | -11.7% | +4.5 pp |
| Net income (loss) | -$15.3M | -$15.1M | -1.7% | -$23.5M | +34.9% |
| Net margin | -3.6% | -3.8% | +0.2 pp | -7.0% | +3.4 pp |
| Diluted EPS | -$0.04 | -$0.04 | ±$0.00 | -$0.07 | +$0.03 |
| Net retention rate | 110.0% | 112.0% | -2.0 pp | 116.0% | -6.0 pp |
Risks
The company states that macroeconomic uncertainty could persist through the remainder of 2024 and that negative trends such as lengthening sales cycles, higher churn, and longer payment timing may emerge or recur. It specifically cites inflation, interest rates, geopolitical conflicts in the Middle East and Ukraine, and elections as pressures on customer spending.
Risk factors state the average sales cycle for new and existing large customers has periodically lengthened since the first half of 2022 and could continue, with larger enterprises undertaking more significant evaluation and negotiation processes. The MD&A says these macroeconomic impacts may have contributed to a slowdown in revenue growth.
Pay-as-you-go customers can terminate or switch to lower-cost plans at will, and the company has periodically experienced higher churn in its paying customer base. The dollar-based net retention rate was 110% for the three months ended September 30, 2024, compared with 116% for the three months ended September 30, 2023.
The growth strategy depends on attracting, expanding, and retaining large customers, which have longer sales cycles and greater pricing leverage. Some large customer agreements use a pool of funds model that does not require specific product subscriptions or spending in any month, quarter, or year, making revenue timing and retention uncertain.
A substantial majority of revenue comes from contracted customers acquired through sales teams, and the company has periodically experienced reduced average productivity among sales personnel since late 2022. Senior sales leadership changes, including a new President of Revenue in February 2024 and subsequent changes, could negatively impact sales team retention and revenue growth.
The company states its rate of revenue growth has slowed in recent periods and may continue to slow, and recent growth should not be considered indicative of future performance. It also says historical rapid growth and fluctuations in growth rate make it difficult to evaluate future prospects and forecast results.
The company faces intense competition from large public cloud providers, telecommunications partners, and point solution vendors, and says competitors may bundle products, offer lower prices, or introduce AI and machine learning based offerings. These pressures could reduce revenue, gross margin, and market share.
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)
Large Customers Added
Summary, forecast, risks and KPIs are extracted from Cloudflare, Inc.'s SEC filings for Q3 FY2024 (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.