Cloud security and performance company Cloudflare (NYSE: NET) announced better-than-expected revenue in Q1 CY2026, with sales up 33.5% year on year to $639.8 million. The company expects next quarter’s revenue to be around $664.5 million, close to analysts’ estimates. Its non-GAAP profit of $0.25 per share was 7% above analysts’ consensus estimates.
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Cloudflare (NET) Q1 CY2026 Highlights:
- Revenue: $639.8 million vs analyst estimates of $620.9 million (33.5% year-on-year growth, 3% beat)
- Adjusted EPS: $0.25 vs analyst estimates of $0.23 (7% beat)
- Adjusted Operating Income: $73.1 million vs analyst estimates of $72.17 million (11.4% margin, 1.3% beat)
- The company slightly lifted its revenue guidance for the full year to $2.81 billion at the midpoint from $2.79 billion
- Management raised its full-year Adjusted EPS guidance to $1.19 at the midpoint, a 7.2% increase
- Operating Margin: -9.7%, up from -11.1% in the same quarter last year
- Free Cash Flow Margin: 13.1%, down from 16.2% in the previous quarter
- Billings: $709.4 million at quarter end, up 37.8% year on year
- Market Capitalization: $87.5 billion
Company Overview
With a massive network spanning more than 310 cities in over 120 countries, Cloudflare (NYSE: NET) provides a global network that delivers security, performance and reliability services to protect websites, applications, and corporate networks.
Revenue Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Cloudflare’s sales grew at an exceptional 37.3% compounded annual growth rate over the last five years. Its growth surpassed the average software company and shows its offerings resonate with customers, a great starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. Cloudflare’s annualized revenue growth of 29.7% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. 
This quarter, Cloudflare reported wonderful year-on-year revenue growth of 33.5%, and its $639.8 million of revenue exceeded Wall Street’s estimates by 3%. Company management is currently guiding for a 29.7% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 27.5% over the next 12 months, a slight deceleration versus the last two years. Despite the slowdown, this projection is noteworthy and implies the market is baking in success for its products and services.
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Billings
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Cloudflare’s billings punched in at $709.4 million in Q1, and over the last four quarters, its growth was fantastic as it averaged 34.2% year-on-year increases. This alternate topline metric grew faster than total sales, meaning the company collects cash upfront and then recognizes the revenue over the length of its contracts - a boost for its liquidity and future revenue prospects. 
Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
Cloudflare is very efficient at acquiring new customers, and its CAC payback period checked in at 26 months this quarter. The company’s rapid recovery of its customer acquisition costs indicates it has a highly differentiated product offering and a strong brand reputation. These dynamics give Cloudflare more resources to pursue new product initiatives while maintaining the flexibility to increase its sales and marketing investments. 
Key Takeaways from Cloudflare’s Q1 Results
We were impressed by how significantly Cloudflare blew past analysts’ billings expectations this quarter. We were also glad its full-year EPS guidance trumped Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. Investors were likely hoping for more given how strong the stock has been, and shares traded down 12% to $223.96 immediately after reporting.
So should you invest in Cloudflare right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).
