Cloudflare, Inc.

Cloudflare reported Q2 revenue of $696.1 million, up 36% year over year. Gross margin was 73.1%, up 30 basis points sequentially but down 320 basis points year over year. Operating income was $96.1 million, up 33% year over year, with a non-GAAP operating margin of 13.8%. Diluted EPS was $0.29, and free cash flow was $56.4 million, or 8% of revenue, up from $33.3 million a year ago. Large customers totaled 4,698, up 27% year over year, and dollar-based net retention was 120%. For Q3 2026, management expects revenue of $736 million to $737 million, operating income of $129 million to $130 million, and diluted EPS of $0.34. For full-year 2026, revenue guidance is $2.864 billion to $2.870 billion, operating income is $443 million to $445 million, and diluted EPS is $1.25 to $1.26.

Matthew Prince framed the quarter as evidence that Cloudflare is benefiting from a major shift toward machine-driven internet traffic and agentic AI. He said nonhuman traffic had already passed human traffic online, and that Cloudflare is positioned to define the next internet business model through products like Monetization Gateway, Wallets, and cloudflare.pay. His tone was highly confident and expansive, emphasizing that the company is “keeping our foot firmly on the gas” and is in the “pole position” for the next phase of the internet.

Thomas Seifert highlighted broad-based strength across revenue, customer cohorts, and product lines. He cited 36% revenue growth to $696.1 million, gross margin of 73.1%, operating income of $96.1 million, and free cash flow of $56.4 million, while also noting $4.2 billion of cash, cash equivalents, and available-for-sale securities. He said severance and other restructuring charges were $151 million in Q2 and could reach up to $165 million for full-year 2026, with up to $130 million cash related, but said free cash flow expectations for 2026 are unchanged excluding those charges. He also guided network CapEx to 14% to 15% of revenue for full-year 2026.

Analysts pressed management on whether rising nonhuman traffic is driving more new logos or more expansion within existing customers, and Prince said both are happening, while also noting Cloudflare is working on monetizing agent traffic through microtransactions. Questions also focused on gross margin stabilization, with Seifert saying the company is more focused on total unit economics than quarter-to-quarter gross margin and expects unit economics to improve in the second half. Other notable topics were the growth of Workers, Cloudflare OS, partner contribution, and whether the company is leaning back toward product-led growth; Prince said Workers is now a meaningful revenue contributor, enterprise sales remain important for large deals, and partner share could continue rising. Management also pushed back on joining the AI infrastructure capex arms race, saying they prefer high-utilization, work-based revenue rather than commodity server leasing.