Cloudflare Surges 21% on Strong Q4 Earnings and New Record Annual Contract Value

Cloudflare, the leading web security and content distribution network provider, reported impressive fourth-quarter earnings on Thursday, February 8, 2024, that surpassed analysts’ expectations and sent the company’s shares soaring by 21% in extended trading. The robust results were driven by significant revenue growth, narrowed net loss, and large new customer deals.

Cloudflare’s revenue for the quarter came in at $362.5 million, a 32% increase compared to the same period last year, and exceeded the analysts’ consensus estimate of $353.1 million. The company’s net loss narrowed to $27.9 million, or 8 cents per share, from $45.9 million, or 13 cents per share, in the year-ago quarter. Adjusted earnings per share were 15 cents, surpassing the expected 12 cents.

Matthew Prince, Cloudflare’s co-founder and CEO, highlighted the company’s achievements during the quarter, including its largest new customer deal and biggest renewal to date, which resulted in a new record in annual contract value. Prince mentioned that the U.S. Commerce Department was among the significant clients that contributed to this growth.

Cloudflare’s strategy to provide software developers with graphics processing units (GPUs) for artificial intelligence (AI) is gaining momentum. By the end of 2023, the company had installed GPUs in 120 cities, surpassing its internal target of 100. The plan is to have inference to GPUs deployed in nearly every city that makes up Cloudflare’s global network and within milliseconds of nearly every device connected to the Internet worldwide by the end of 2024.

The company’s focus on security services for businesses and government agencies is another growth area, as cyberattacks have become increasingly common. Prince mentioned the recent terrorist attack in Israel by Hamas as an example of the heightened security concerns.

Cloudflare also announced that Mark Anderson, a board member who was formerly CEO of Alteryx, has joined the company as president, replacing Marc Boroditsky. The private equity firms Clearlake Capital Group and Insight Partners acquired Alteryx for $4.4 billion in December 2023. Prince assured investors that he and co-founder and operating chief Michelle Zatlyn would remain with the company.

For the first quarter of 2024, Cloudflare expects adjusted net earnings per share of 13 cents on $372.5 million to $373.5 million in revenue. Analysts surveyed by LSEG had projected 12 cents per share in adjusted earnings and revenue of $372.3 million. For the full year, Cloudflare’s earnings outlook is higher than consensus, but the middle of the revenue range missed slightly. The company sees 58 cents to 59 cents in adjusted earnings per share and revenue from $1.648 billion to $1.652 billion.

Excluding the after-hours move, Cloudflare stock has gained about 8% year-to-date, while the S&P 500 has risen approximately 5% during the same period.

Cloudflare’s strong fourth-quarter earnings report and new record annual contract value demonstrate the company’s continued growth and success in the web security and content distribution market. The company’s focus on AI, security services, and expanding its global network position it well for future growth.

In conclusion, Cloudflare’s impressive fourth-quarter earnings report, which included revenue growth, narrowed net loss, and significant new customer deals, resulted in a 21% increase in the company’s shares in extended trading. The company’s strategy to provide GPUs for AI, focus on security services, and expansion of its global network are key growth areas. With a new record in annual contract value and a strong earnings outlook for 2024, Cloudflare is well-positioned for continued success in the web security and content distribution market.