Cloudflare Q1 2025 slides: 27% revenue growth with expanding global network

Introduction & Market Context

Cloudflare, Inc. (NYSE:NET) presented its Q1 2025 investor slides on March 31, 2025, highlighting continued strong revenue growth and an expanding global network. The company, which launched in 2010, has positioned itself as a leading provider of cloud-based security, performance, and reliability services, with a focus on helping build what it calls "a better Internet."

The presentation comes as Cloudflare’s stock has shown significant momentum, with fundamentals data indicating a 2.25% increase on May 8, 2025, and additional 4.96% gain in after-hours trading. This positive market response aligns with the company’s strong financial performance and growth trajectory outlined in the investor presentation.

Quarterly Performance Highlights

Cloudflare reported Q1 2025 revenue of $479 million, representing a 27% year-over-year increase from $379 million in Q1 2024. This growth continues the company’s strong revenue trajectory, which saw total revenue reach $1.67 billion for the full year 2024.

As shown in the following revenue growth chart:

The company maintained a robust non-GAAP gross margin of 77% in Q1 2025, demonstrating the efficiency of its serverless architecture deployed on commodity hardware. Cloudflare attributes this consistent margin performance to its single software stack across the network, symbiotic relationships with ISPs, and ability to leverage idle capacity across its network.

Cloudflare’s customer metrics also showed strong growth, with paying customers increasing to 250,819 in Q1 2025, up 27% year-over-year. More importantly, large customers (those generating over $100,000 in annualized revenue) grew to 3,527, representing a 23% year-over-year increase. These large customers now account for 69% of Cloudflare’s total revenue.

The following chart illustrates this customer growth trend:

Strategic Initiatives and Global Expansion

A key element of Cloudflare’s strategy is its expanding global network, which now spans over 330 cities in more than 125 countries, including mainland China. The company highlighted that approximately 95% of the world’s Internet-connected population is within 50 milliseconds of a Cloudflare data center, underscoring the company’s global reach and low-latency capabilities.

The global scale of Cloudflare’s network is visualized in this world map:

Cloudflare’s platform processes massive volumes of data, blocking an average of approximately 247 billion cyber threats per day. The company now directly connects with around 13,000 networks and has built network capacity of 388 Tbps. This scale provides Cloudflare with significant data intelligence that it leverages to improve its machine learning systems and product offerings.

The company’s integrated global cloud platform encompasses a wide range of services across zero trust, network services, application services, and developer services:

Competitive Positioning and Market Opportunity (SO:FTCE11B)

Cloudflare positions itself as a disruptor in the transition from traditional hardware and software products to cloud-based services. The company contrasts its "Better Internet" approach as a global cloud platform against the traditional "Band-Aid Boxes" approach, highlighting advantages such as ease of use, flexibility, scalability, and an integrated product platform.

The company’s total addressable market (TAM) has expanded significantly from $32 billion in 2018 to a projected $231 billion by 2028, driven by growth across its service categories and potential new growth areas such as AI, database services, IoT, 5G cellular, and network services.

This TAM expansion is illustrated in the following chart:

Cloudflare highlighted its competitive advantages against on-premises solutions (described as complex and expensive), point solutions (with narrower product portfolios), and public cloud providers (citing concerns about customer lock-in and inability to serve as a unified control plane across diverse infrastructure).

Financial Outlook and Forward-Looking Statements

For Q2 2025, Cloudflare provided revenue guidance of $500.0-$501.0 million, representing approximately 25% year-over-year growth. The company expects non-GAAP operating income of $62.5-$63.5 million, translating to an operating margin of 12-13%, and non-GAAP EPS of $0.18.

For the full year 2025, Cloudflare projects:

• Revenue of $2,090-$2,094 million (25% year-over-year growth)
• Non-GAAP operating income of $272-$276 million (13% operating margin)
• Non-GAAP EPS of $0.79-$0.80
• Network CapEx of 12-13% of revenue

Cloudflare’s long-term operating model targets include:

• Gross margin of 75-77%
• Sales & marketing expense of 27-29% of revenue
• R&D expense of 18-20% of revenue
• G&A expense of 8-10% of revenue
• Operating margin of 20%+
• Free cash flow margin of approximately 25%+

The company’s cash position remains strong, with $1.915 billion in cash, cash equivalents, and available-for-sale securities as of Q1 2025, up from $1.716 billion in Q1 2024. Operating cash flow margin improved significantly to 30% in Q1 2025 from 19% in Q1 2024, demonstrating improved operational efficiency.

Cloudflare’s dollar-based net retention rate stood at 111% in Q1 2025, showing a slight decrease from 115% in Q1 2024 but still indicating strong expansion within its existing customer base.

As Cloudflare continues to execute on its strategy for growth—acquiring new customers, expanding relationships with existing customers, developing new products, and extending its serverless platform—the company appears well-positioned to capitalize on the ongoing shift to cloud services and the growing demand for integrated security, performance, and reliability solutions.

Full presentation:

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