Cloudflare (NET) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue grew 28% year-over-year to $430.1 million, driven by record large customer additions and expansion within the existing base, with a dollar-based net retention rate of 110%.

• Large customers (>$100K/year) reached 3,265, up 28% year-over-year, now contributing 67% of revenue and including 35% of the Fortune 500.

• Total paying customers grew to 221,540, a 22% year-over-year increase, with 50% of revenue generated outside the U.S.

• Sales productivity improved, especially in EMEA and APAC, with North America expected to accelerate as new enterprise-focused hires ramp up.

• Supported U.S. 2024 election security by providing free services to hundreds of government websites.

Financial highlights

• Q3 2024 revenue: $430.1 million, up 28% year-over-year; U.S. revenue up 22%, EMEA up 31%, APAC up 38%.

• Non-GAAP gross margin was 78.8% and GAAP gross margin was 77.7% for Q3 2024.

• Non-GAAP income from operations was $63.5 million (14.8% of revenue), up from $42.5 million (12.7%) in Q3 2023.

• Free cash flow was $45.3 million (11% of revenue) for Q3 2024; operating cash flow reached $104.7 million.

• Cash, cash equivalents, and available-for-sale securities totaled $1.82 billion as of September 30, 2024.

Outlook and guidance

• Q4 2024 revenue expected at $451–$452 million, up 25% year-over-year; non-GAAP income from operations $57–$58 million; EPS $0.18.

• Full-year 2024 revenue guidance: $1.661–$1.662 billion, up 28% year-over-year; non-GAAP income from operations $220–$221 million; EPS $0.74.

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

• Non-GAAP effective tax rate expected to rise to 19–22% in 2025.

• Management expects macroeconomic uncertainty to persist through 2024, potentially impacting sales cycles and payment timing.