Cloudflare Exceeds Expectations with Strong Q3 Performance
Cloudflare NET has reported impressive third-quarter 2024 non-GAAP earnings of 20 cents per share, outperforming the Zacks Consensus Estimate by 11.11%. This marks a substantial year-over-year increase of 29.4%.
In fact, NET has topped the Zacks Consensus Estimate for earnings in each of the last four quarters, with an average surprise of 25.5%.
Check out the latest EPS estimates and surprises on Zacks Earnings Calendar.
For the third quarter, NET’s revenues reached $430.1 million, exceeding expectations by 1.52%.
This 28.2% growth in revenues compared to the previous year is largely due to strong new enterprise onboarding, significant advances in the public sector, and heightened customer focus on security, coupled with a zero-trust approach.
NET’s solid third-quarter results, propelled by an influx of large enterprises outside the United States, have led to an increased fourth-quarter outlook. However, the stock experienced a decline of over 6% in pre-market trading.
Year-to-date, NET’s shares have appreciated 14.9%, lagging behind the Zacks Internet – Software industry’s return of 30.1%.
Detailed Q3 Financial Metrics
The success of NET’s top-line performance is attributed to a diverse mix of customer segments, covering both Channel Partners and Direct Customers.
Revenue from Channel Partners, which comprises 20.7% of total revenue, hit $88.9 million, reflecting a remarkable 70% increase from last year.
Cloudflare, Inc. Price, Consensus and EPS Surprise
Cloudflare, Inc. price-consensus-eps-surprise-chart | Cloudflare, Inc. Quote
Similarly, revenues from Direct Customers, making up 79.3% of the total, totaled $341.2 million, showing a 20% rise year over year.
The company had 221,540 paying customers in Q3, which is a 22% year-over-year increase. Additionally, NET added 219 new customers with annual revenues exceeding $100,000, bringing the total to 3,265 by the end of the quarter.
NET’s non-GAAP gross profit for the third quarter jumped 28% year over year to $339.1 million, while the non-GAAP gross margin rose by 10 basis points to 78.8%.
Moreover, non-GAAP operating income surged to $63.5 million, up from $42.5 million in the same quarter last year. The non-GAAP operating margin improved by 210 basis points to 14.8%.
Financial Health: Balance Sheet and Cash Flow
As of September 30, 2024, Cloudflare reported cash, cash equivalents, and available-for-sale securities amounting to $1.82 billion, a rise from $1.76 billion as of June 30, 2024.
NET generated an operating cash flow of $104.7 million alongside a free cash flow of $45.3 million.
Updated Guidance for Q4 and FY24
Looking ahead to the fourth quarter, Cloudflare anticipates revenues between $451 million and $452 million.
The current Zacks Consensus Estimate for revenues stands at $455.1 million, representing a year-over-year increase of 25.6%.
For Q4, non-GAAP income from operations is projected between $57 million and $58 million, with expected non-GAAP earnings of 18 cents per share.
The Zacks Consensus Estimate for earnings is currently set at 17 cents per share, signifying a year-over-year growth of 13.3%.
For the entire year of 2024, NET expects revenues to fall between $1.661 billion and $1.662 billion. The consensus estimate for revenues is $1.66 billion, suggesting an increase of 27.9% from the previous year.
Non-GAAP income from operations is forecasted between $220 million and $221 million, while non-GAAP earnings are expected to be 74 cents per share.
The Zacks Consensus Estimate for earnings stands at 71 cents per share, reflecting a year-over-year increase of 44.9%.
Zacks Rank and Alternative Investments
Currently, NET holds a Zacks Rank #3 (Hold).
Shopify SHOP, CyberArk Software CYBR, and Bilibili BILI are among better-ranked stocks worth considering in the broader Zacks Computer & Technology sector.
Both Shopify and CyberArk boast a Zacks Rank #1 (Strong Buy), while Bilibili carries a Zacks Rank #2 (Buy). Explore the complete list of today’s Zacks #1 Rank stocks here.
Year-to-date, SHOP shares have risen 9.8%. Shopify plans to announce its third-quarter 2024 results on November 12.
CYBR shares have surged by 35.2% in the same time frame. CyberArk Software is scheduled to report its third-quarter 2024 results on November 13.
BILI shares have skyrocketed, showing a 98.3% increase year-to-date. Bilibili is set to release its third-quarter results on November 14.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
