Cloudflare Reports 39% Revenue Growth Amid Declining Gross Margins
Cloudflare (NET) reported strong third-quarter results, with revenue increasing 39% year-over-year to $782.5 million, pushing annualized revenue past the $3 billion milestone. Despite the top-line growth and a significant jump in after-hours share price, the company faced pressure on profitability metrics. GAAP gross margin fell to 71.2% from 74% a year ago, driven by cost of revenue growing at 54%, outpacing sales. The company also reported a widening GAAP operating loss of $67.9 million compared to $37.5 million in the prior-year period. This discrepancy is largely attributed to rising stock-based compensation and payroll taxes. While Cloudflare announced a workforce reduction plan, specific details regarding headcount or cost savings were not disclosed. Investors are now looking toward fourth-quarter guidance to see if margins stabilize.
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Topics: free cash flow gross margin operating loss revenue growth workforce reduction
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