Cloudflare

First quarter revenue hit 639.8 million dollars, up 34% year over year, an acceleration from the 30% pace last year. Current remaining performance obligations also grew 34%, meaning the order book is keeping pace with reported revenue. Free cash flow jumped to 84.1 million dollars, or 13% of revenue, and management raised the full year outlook to roughly 2.81 billion dollars in revenue.

Non-GAAP operating income rose to 73.1 million dollars, and non-GAAP net income jumped 61% to 94 million dollars. The company is also restructuring around an agentic AI-first model, cutting roughly 1,100 roles, which should expand margins further. Cash and securities sit at 4.16 billion dollars, giving Cloudflare plenty of firepower to keep investing in AI infrastructure.

Cloudflare trades at over 25 times forward sales, one of the most expensive multiples in software. The market has priced in years of execution at very high standards. GAAP operating losses widened to 62 million dollars this quarter and gross margin compressed to 71.2% from 75.9% a year ago as AI infrastructure costs ramp. Any growth deceleration could trigger a sharp re-rating.

Microsoft, AWS, and Google all offer competing networking and edge compute services bundled with cloud spending. They can subsidize those products to take share. The 1,100 person workforce reduction will also generate up to 150 million dollars in restructuring charges in the second quarter, and execution risk on a major operating model overhaul is real.