Summary
Cloudflare grew third quarter fiscal 2025 revenue 30.7% year over year to $562.0 million, and management said growth accelerated for the second consecutive quarter. Year-to-date revenue of $1.55 billion was up 28.4% from the same nine months of fiscal 2024. The increase came from new paying customers and from expansion inside the existing base. Cloudflare sells subscriptions to a global network of security, performance, and developer products, and the mix keeps tilting toward large enterprise accounts.
Profitability split two ways. Gross profit of $415.7 million grew 24.4%, but gross margin fell to 74.0% from 77.7% because the cost of running the network expanded faster than sales. Cost of revenue rose 52%, driven by higher third-party technology services costs, more spending on co-location and bandwidth, and higher depreciation on servers. The GAAP operating loss widened to $37.5 million from $30.8 million, even though operating margin improved to negative 6.7% from negative 7.2% as revenue scaled faster than the loss. The net loss narrowed to $1.3 million from $15.3 million, and diluted EPS was $0.00 against a loss of $0.04 a year earlier. The nine-month picture is weaker. The net loss of $90.2 million widened from $66.0 million, and diluted EPS was a loss of $0.26 versus $0.19.
Cash generation was the strongest part of the report. Operating cash flow of $167.1 million rose 59.6% year over year, and the nine-month total of $412.7 million was up 63.0%. Capital expenditures of $84.6 million increased 68.6% as the company kept buying servers and expanding capacity. Free cash flow, a non-GAAP measure that is not a substitute for operating cash flow, was $75.0 million, or 13% of revenue, compared with $45.3 million, or 11%, in the prior-year quarter.
Demand indicators held up. Deferred revenue, current portion, reached $599.0 million, up 53.7%. Remaining performance obligations were $2.14 billion, up 42.6%, and current RPO grew 30%. Paying customers totaled 295,552, a 33% increase from 221,540 a year earlier. Customers with more than $100,000 of annualized revenue numbered 4,009, up from 3,265, and dollar-based net retention was 119% against 110%. International customers produced 50% of revenue in the quarter, flat with the prior-year period. Executive commentary leaned on the pace of new product releases and on AI-related workloads as sources of pipeline.
The fourth quarter of fiscal 2025 guidance includes revenue, non-GAAP income from operations of $83.0 million to $84.0 million, and non-GAAP net income per share of $0.27 on roughly 377 million weighted average shares. For the full fiscal year 2025, the company expects non-GAAP income from operations of $297.0 million to $298.0 million and non-GAAP net income per share of $0.91 on about 370 million shares. Cloudflare does not reconcile forward-looking non-GAAP guidance to GAAP without unreasonable effort.
Risks remain substantial. Cloudflare carries an accumulated deficit and expects to keep posting operating losses. Management called out tariffs on network equipment sourced abroad, lengthening sales cycles, higher churn, slower collections from customers, and macroeconomic uncertainty that could last through 2026. Heavy stock-based compensation keeps GAAP results in the red even as non-GAAP profit grows. Separately, CJ Desai will step down as President of Product Engineering effective November 7, 2025, a departure worth tracking given how much of the story rests on the pace of product releases.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2025 | Q2 FY2025 | QoQ | Q3 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $562.0M | $512.3M | +9.7% | $430.1M | +30.7% |
| Gross profit | $415.7M | $383.6M | +8.4% | $334.1M | +24.4% |
| Gross margin | 74.0% | 74.9% | -0.9 pp | 77.7% | -3.7 pp |
| Research & development | $121.0M | $134.6M | -10.1% | $110.9M | +9.1% |
| Sales & marketing | $236.3M | $219.4M | +7.7% | $185.2M | +27.6% |
| General & administrative | $95.9M | $97.0M | -1.1% | $68.8M | +39.4% |
| Total operating expenses | $453.2M | $450.9M | +0.5% | $364.9M | +24.2% |
| Operating income (loss) | -$37.5M | -$67.3M | +44.3% | -$30.8M | -21.6% |
| Operating margin | -6.7% | -13.1% | +6.5 pp | -7.2% | +0.5 pp |
| Net income (loss) | -$1.3M | -$50.4M | +97.4% | -$15.3M | +91.6% |
| Net margin | -0.2% | -9.8% | +9.6 pp | -3.6% | +3.3 pp |
| Diluted EPS | $0.00 | -$0.15 | +$0.15 | -$0.04 | +$0.04 |
| Net retention rate | 119.0% | — | — | 110.0% | +9.0 pp |
Risks
The filing states U.S. tariffs and retaliatory measures may increase the cost of equipment used to operate the global network and cause corporate spending to be delayed or curtailed; MD&A says the company is still assessing the expected financial impact of U.S. tariffs on capital expenditures, which were up 106.0% year to date.
MD&A and risk factors say the company periodically has experienced lengthening of average sales cycles, slowdowns in pipeline conversion, increases in average days sales outstanding, higher churn in the paying customer base, and lengthening payment timing, which may have contributed to a slowdown in revenue growth; macroeconomic uncertainty could persist through 2026.
Gross margin decreased to 74% from 78% for the three months ended September 30, 2025 and to 75% from 78% for the nine months ended September 30, 2025, primarily due to increases in cost of revenue including third-party technology services, co-location and network bandwidth costs, and depreciation.
Growth strategy depends on attracting and retaining large customers, which involve longer evaluation and negotiation cycles, greater pricing leverage, and some agreements with pool-of-funds structures or more customer-favorable termination rights; paying customers with more than $100,000 annualized revenue increased to 4,009 from 3,265 as of September 30, 2025.
The company relies on co-founders and key technical, sales, and management personnel, and MD&A discloses a $10.0 million reversal of stock-based compensation during the three months ended September 30, 2025 due to forfeitures of Performance Options upon a key employee departure.
Competition is increasing as established and emerging companies introduce cloud-based and AI/ML-enabled products, and larger competitors may bundle products or price aggressively; the company is investing in GPUs to support AI-related developer platform products.
As of September 30, 2025, $1,293.8 million principal of 2026 Notes and $2,000.0 million principal of 2030 Notes were outstanding; the credit agreement contains restrictive covenants and events of default, and capped call counterparties expose the company to counterparty risk.
The company has faced negative publicity from use of its network by The Daily Stormer, 8chan, and Kiwi Farms, and some potential customers decided not to subscribe; actions to ban customers also drew adverse feedback.
Headcount grew from 4,160 employees as of September 30, 2024 to 4,838 employees as of September 30, 2025, and the company says rapid growth strains management, operational, and financial infrastructure; sales and marketing headcount increased 22% and research and development headcount increased 14%.
Stock-based compensation expense and related employer payroll taxes were $119.7 million for the three months ended September 30, 2025 and $357.6 million for the nine months ended September 30, 2025, and the company says equity awards can cause dilution and increase stock-based compensation expense.
SaaS KPIs
All quarters →Dollar-Based Net Retention Rate
Free Cash Flow Margin
Paying customers
Non-GAAP Operating Margin
Free Cash Flow
Current RPO (year-over-year growth)
RPO year-over-year growth
Summary, forecast, risks and KPIs are extracted from Cloudflare, Inc.'s SEC filings for Q3 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 Sep 24, 2026.