Cloudflare (NET) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue grew 30% year-over-year to $401 million, with annualized revenue surpassing $1.6 billion and strong momentum in large customers and international markets.

• Large customers (> $100K annualized revenue) reached 3,046, accounting for 67% of revenue, and paying customers increased 21% year-over-year to 210,166.

• Developer platform and AI offerings saw rapid adoption, with active developer accounts up 20% quarter-over-quarter and AI inference requests up 700%.

• The company operates a global network in 330+ cities, serving 210,000+ paying customers, including 30% of the Fortune 500.

• CEO highlighted strong execution, improved sales productivity, and the company's growing strategic importance for customers.

Financial highlights

• Q2 2024 gross margin was 79% (non-GAAP), with GAAP gross margin at 78%; non-GAAP operating income was $57 million (14% margin), and net income was $69.5 million.

• Free cash flow was $38.3 million (10% of revenue), up from $20 million (6%) a year ago; operating cash flow margin was 19%.

• Cash, cash equivalents, and available-for-sale securities totaled $1.76 billion as of June 30, 2024.

• Dollar-based net retention rate was 112% for Q2 2024, down from 115% in Q2 2023.

• Net loss narrowed to $15.1 million from $94.5 million in Q2 2023, reflecting improved operating leverage.

Outlook and guidance

• Q3 2024 revenue expected at $423–$424 million, up 26% year-over-year; non-GAAP operating income of $50–$51 million; EPS of $0.18.

• Full-year 2024 revenue guidance raised to $1,657–$1,659 million, up 28% year-over-year; non-GAAP operating income of $196–$198 million; EPS of $0.70–$0.71.

• Free cash flow for 2024 expected at $160–$164 million.

• FY 2024 network capex projected at 10%–12% of revenue.

• Management expects continued investment in growth initiatives, with operating losses and cash flow fluctuations likely in the near term.