Report · World Listens
Cloudflare ( NET -8.28% ) grew third-quarter revenue 39% to $782.5 million. Shares jumped about 15% in after-hours trading. Growth is strong, and each new dollar of sales now leaves less behind.
Gross margin fell about 3 points, and free cash flow margin slipped to 10% from 13%. Key Numbers Revenue: $782.5 million, up from $562.0 million a year earlier GAAP gross margin: 71.2%, versus 74% a year earlier GAAP loss from operations: $67.9 million, versus $37.5 million a year earlier Free cash flow: $82.1 million, versus $75.0 million a year earlier What It Means Cost of revenue grew 54%, far faster than sales, which alone explains the lower gross margin. The release does not say why.
Cloudflare runs its own global network, so added capacity hits cost of revenue and capital spending before the sales that fill it. NET Cloudflare $244.51 -$22.07 (-8.28%) NYSE · As of 4:00 PM ET 11/05/26 Equipment purchases rose 44%, faster than operating cash flow, so free cash flow grew far less than sales. Non-GAAP operating margin improved, but GAAP shows a wider loss.
The gap is mostly stock-based pay and related payroll taxes, which rose 45%, faster than revenue. What to Watch Next Watch whether gross margin stabilizes as revenue heads toward the $845 million to $846 million fourth-quarter guide. Also look for the cost and headcount of the workforce reduction plan, which the release mentions only in its forward-looking statements.
David Kretzmann has positions in Cloudflare. The Motley Fool has positions in and recommends Cloudflare. The Motley Fool has a disclosure policy .
Source: The Motley Fool
