Internet security and content delivery network Cloudflare (NYSE:NET) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 27.8% year on year to $512.3 million. Guidance for next quarter’s revenue was better than expected at $544 million at the midpoint, 1.1% above analysts’ estimates. Its non-GAAP profit of $0.21 per share was 15.5% above analysts’ consensus estimates.
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Cloudflare (NET) Q2 CY2025 Highlights:
- Revenue: $512.3 million vs analyst estimates of $501 million (27.8% year-on-year growth, 2.3% beat)
- Adjusted EPS: $0.21 vs analyst estimates of $0.18 (15.5% beat)
- Adjusted Operating Income: $72.32 million vs analyst estimates of $63.38 million (14.1% margin, 14.1% beat)
- The company lifted its revenue guidance for the full year to $2.11 billion at the midpoint from $2.09 billion, a 1.1% increase
- Management raised its full-year Adjusted EPS guidance to $0.86 at the midpoint, a 7.5% increase
- Operating Margin: -13.1%, down from -8.7% in the same quarter last year
- Free Cash Flow Margin: 6.5%, down from 11% in the previous quarter
- Billings: $559.2 million at quarter end, up 32.6% year on year
- Market Capitalization: $69.62 billion
Company Overview
Founded by two grad students of Harvard Business School, Cloudflare (NYSE:NET) is a software-as-a-service platform that helps improve the security, reliability, and loading times of internet applications.
Revenue Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last three years, Cloudflare grew its sales at an excellent 32.3% compounded annual growth rate. Its growth surpassed the average software company and shows its offerings resonate with customers, a great starting point for our analysis.
This quarter, Cloudflare reported robust year-on-year revenue growth of 27.8%, and its $512.3 million of revenue topped Wall Street estimates by 2.3%. Company management is currently guiding for a 26.5% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 25.1% over the next 12 months, a deceleration versus the last three years. Still, this projection is noteworthy and implies the market is forecasting success for its products and services.
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Billings
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Cloudflare’s billings punched in at $559.2 million in Q2, and over the last four quarters, its growth was fantastic as it averaged 30.3% year-on-year increases. This alternate topline metric grew faster than total sales, meaning the company collects cash upfront and then recognizes the revenue over the length of its contracts - a boost for its liquidity and future revenue prospects. 
Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
Cloudflare is very efficient at acquiring new customers, and its CAC payback period checked in at 28.2 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give Cloudflare more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments. 
Key Takeaways from Cloudflare’s Q2 Results
This was a 'beat and raise' quarter with very little to pick on. We were impressed by how significantly Cloudflare blew past analysts’ billings expectations this quarter. We were also happy its revenue and operating profit both outperformed Wall Street’s estimates, growing efficient topline growth. Looking ahead, the company also raised full-year revenue and EPS guidance. Overall, this print was very strong. The stock traded up 6.4% to $220.87 immediately following the results.
Indeed, Cloudflare had a rock-solid quarterly earnings result, but is this stock a good investment here? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free.