Cloudflare reported Q2 in August, and the market liked what it saw. Revenue growth again accelerated, showing that its expanding platform is meeting a new wave of demand from agentic AI across all of Cloudflare’s product lines. Workers became a more meaningful contributor with its consumption-based pricing, and the revamped enterprise GTM team continued to deliver larger customer commitments. The stock is up 61% YTD after hitting an all-time high last week.

  • Act 3 has enabled Cloudflare to bolster its traditional SaaS subscription pricing with a consumption-based model tied to CPU, GPU, memory, and storage usage.  
  • Agentic AI is driving demand across all Acts, but especially in those consumption-based Workers services.
  • They have reaccelerated from +27.8% growth a year ago to +35.9%, driven by Workers and continued momentum in their largest customers.
  • Their major enterprise GTM rebuild over the past 2 years is delivering. Large customer ARR is growing at an implied +39.7%, and NRR has risen back to 120% over the past 2 years.
  • Even smaller customers are seeing massive demand growth from agentic AI, growing ARR at an implied +26.5%.
  • The May RIF impacted margins, as expected. Despite some lingering impacts into Q3, I expect margins to rebound and resume their upward march. Mgmt believes they will hit Rule of 50 in FY27 and be GAAP positive by the end of FY28.
  • They stopped reporting the number of paying customers in KPIs, which sadly obscures the massive demand wave they are seeing across their various product lines. Mgmt noted that paying customers grew +74% YoY, and every large customer cohort hit record TTM net new adds.
  • Their core US market continues to reaccelerate. My only disappointment was weak APAC growth, despite the major win highlighted. I'd like to see some momentum here through regional partners and sovereign AI & data efforts.
  • Workers is clearly seeing major demand and is driving a number of large deals. They added more Workers developers this quarter than all of FY25.
  • Mgmt is projecting continued strength in the 2H, and Act 3 and 4 are likely to provide further upside.
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I covered Cloudflare's Q425 results in February and Q126 results in June (including their RIF and the emergence of Cloudflare OS).

I also walked through its Act 2 and Act 3 moves in April and further agentic and Act 4 moves in June.