Cloudflare Surpasses Expectations with 300 Basis Points Revenue Beat

Cloudflare (NET.US) reported strong first-quarter earnings, surpassing market expectations and securing significant large orders. The company's revenue for the quarter reached $479 million, exceeding the guidance by $10 million and market expectations by 300 basis points. This performance was driven primarily by substantial orders for Security Access Service Edge (SASE) and Workers products, highlighting Cloudflare's strong position in the hot markets of network security and AI empowerment.

Despite an operating profit margin of 11%, slightly below expectations, Cloudflare has increased its marketing expenditure to 38% of revenue, up from 36% in the fourth quarter of 2024. This strategic move aims to capitalize on growth opportunities. Analysts note that while the management has maintained the full-year guidance, there are multiple upside potentials. The shift of AI applications from model training to large-scale implementation aligns perfectly with Cloudflare's core strengths, and the company's investments in the SASE sector are gaining widespread recognition in the high-end market.

Although Cloudflare's valuation is higher than that of other high-growth SaaS companies, it is one of the few that can achieve accelerating growth and continuous improvement in fundamentals. The company secured a five-year, $130 million contract, further validating its strategic importance and infrastructure value in the AI era. While the operating profit margin met expectations, the large orders underscore the market's potential.

Analysts from various firms have maintained their positive outlook on Cloudflare. Morgan Stanley, for instance, has upgraded its target price from $144 to $150 while keeping its "overweight" rating. The successful closure of nine-figure deals and seven-year contracts demonstrates the platform's value and customer confidence in continuous innovation. With a robust go-to-market team, Cloudflare has proven to be a versatile player capable of thriving in uncertain environments.