Cloudflare $NET Q1'26 Results:

↗️$639.8M rev (+33.5% YoY, +4.1% QoQ) beat est by 3.1%

↘️GM* (72.8%, -4.3 PPs YoY)🟡

↘️Operating Margin* (11.4%, -0.3 PPs YoY)🟡

↗️FCF Margin (13.1%, +2.1 PPs YoY)

↗️Net Margin (-3.6%, +4.5 PPs YoY)

↗️EPS* $0.25 beat est by 8.7%

*non-GAAP

Key Metrics

↘️DBNR 118% (120% LQ) 🟡

↗️RPO $2.54B (+36.4% YoY)

↗️Billings $709M (+37.8% YoY)🟢

Customers

➡️4,416 $100k+ customers (+25.2% YoY, +118)

Operating expenses

↘️S&M*/Revenue 35.6% (-2.7 PPs YoY)

↘️R&D*/Revenue 15.9% (-0.2 PPs YoY)

↘️G&A*/Revenue 9.9% (-1.1 PPs YoY)

Quarterly Performance Highlights

↗️Net New ARR $101M (+31.7% YoY)

↗️CAC* Payback Period 34.9 Months (+1.1 YoY)🟡

↗️R&D* Index (RDI) 2.06 (+0.43 YoY)🟢

Dilution

↘️SBC/rev 20%, -1.6 PPs QoQ

↘️Basic shares up 2.0% YoY, -0.1 PPs QoQ

↗️Diluted shares up 8.6% YoY, +4.1 PPs QoQ🔴

Headcount

↗️5,483 Total Headcount (+24.6% YoY, +327 added)🟢

Guidance

↗️Q2'26 $664.0 - $665.0M guide (+29.7% YoY) beat est by 0.2%

↗️$2,805.0 - $2,813.0M FY guide (+29.6% YoY) raised by 0.6% beat est by 0.7%

Pros

Revenue growth remains strong at 33.5% YoY.

Billings growth signals resilient demand.

Large-customer momentum continues to improve.

Workers adoption accelerated materially.

AI usage supports operating leverage potential.

FY2026 guidance implies durable ~30% growth.

Cons

Gross margin compression remains visible.

DBNR declined sequentially to 118%.

RPO growth slowed to 2% sequentially.

Dilution increased through higher share count.

CapEx intensity is expected to rise.

Restructuring adds execution risk.