In a world increasingly reliant on digital connectivity, Cloudflare, Inc. transforms how businesses safeguard and optimize their online presence. As a leading force in the Software – Infrastructure industry, Cloudflare’s innovative suite of security and performance solutions empowers organizations to navigate the complexities of the internet with confidence. With a reputation for quality and cutting-edge technology, I find myself questioning whether Cloudflare’s robust fundamentals still support its current market valuation and growth trajectory.
Table of contents
Company Description
Cloudflare, Inc. (ticker: NET), founded in 2009 and headquartered in San Francisco, CA, operates as a prominent cloud services provider specializing in integrated security solutions for businesses globally. With a market capitalization of approximately $70.4B, Cloudflare serves diverse industries, including technology, healthcare, and finance, offering products such as cloud firewalls, bot management, and content delivery services. The company distinguishes itself in the Software – Infrastructure sector, combining hardware, software, and services to enhance cybersecurity and performance. As a key player in its industry, Cloudflare is strategically positioned to drive innovation and shape the future of internet security and performance.
Fundamental Analysis
In this section, I will analyze Cloudflare, Inc.’s income statement, financial ratios, and dividend payout policy to assess its financial health and investment potential.
Income Statement
The following table summarizes the income statement for Cloudflare, Inc. (Ticker: NET) over the past five fiscal years, highlighting key financial metrics.
| Metric | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Revenue | 431M | 656M | 975M | 1.30B | 1.67B |
| Cost of Revenue | 101M | 147M | 233M | 307M | 379M |
| Operating Expenses | 440M | 657M | 991M | 1.24B | 1.45B |
| Gross Profit | 330M | 509M | 743M | 990M | 1.29B |
| EBITDA | -44M | -125M | -92M | -43M | 62M |
| EBIT | -110M | -220M | -237M | -237M | -66M |
| Interest Expense | 25M | 49M | 5M | 6M | 5M |
| Net Income | -119M | -260M | -193M | -184M | -79M |
| EPS | -0.40 | -0.83 | -0.59 | -0.55 | -0.23 |
| Filing Date | 2021-02-25 | 2022-03-01 | 2023-02-24 | 2024-02-21 | 2025-02-20 |
Interpretation of Income Statement
Over the five-year period, Cloudflare has demonstrated significant revenue growth, increasing from 431M in 2020 to 1.67B in 2024. Despite this growth, the company has consistently reported net losses, although the losses have narrowed considerably from -119M in 2020 to -79M in 2024. The gross profit margin has improved, reflecting better control over costs relative to revenue growth. In the most recent year, while EBITDA turned positive for the first time, the net income remains negative, indicating that challenges in profitability persist, warranting careful consideration for investors focused on long-term performance.
Financial Ratios
The following table summarizes the key financial ratios for Cloudflare, Inc. (NET) over the past few years:
| Ratios | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Net Margin | -27.69% | -39.66% | -19.83% | -14.19% | -4.72% |
| ROE | -14.61% | -31.91% | -30.99% | -24.11% | -7.53% |
| ROIC | -7.77% | -6.77% | -8.93% | -8.50% | -6.61% |
| P/E | -190.83 | -157.77 | -76.29 | -151.02 | -466.54 |
| P/B | 27.88 | 50.34 | 23.64 | 36.41 | 35.14 |
| Current Ratio | 7.99 | 6.77 | 4.74 | 3.50 | 2.86 |
| Quick Ratio | 7.99 | 6.77 | 4.74 | 3.50 | 2.86 |
| D/E | 0.52 | 1.59 | 2.53 | 1.88 | 1.40 |
| Debt-to-Assets | 31.02% | 54.52% | 60.94% | 52.00% | 44.32% |
| Interest Coverage | -4.43 | -3.01 | -49.91 | -42.73 | -29.78 |
| Asset Turnover | 0.31 | 0.28 | 0.38 | 0.47 | 0.51 |
| Fixed Asset Turnover | 2.58 | 2.09 | 2.33 | 2.81 | 2.63 |
| Dividend Yield | 0% | 0% | 0% | 0% | 0% |
Interpretation of Financial Ratios
In assessing Cloudflare, Inc. (NET), key ratios reveal significant challenges. The current ratio stands at 2.86, indicating solid liquidity, but the quick ratio is equivalent, suggesting a reliance on receivables. However, the solvency ratio is alarmingly low at 0.022, highlighting potential insolvency risks. Profitability metrics reveal a gross profit margin of 77.3%, yet the net profit margin is negative at -4.72%, indicating ongoing losses. Efficiency ratios show a receivables turnover of 5.01, while the debt-to-equity ratio is concerning at 1.40, suggesting substantial leverage. Overall, while liquidity appears strong, profitability and solvency require urgent attention, posing risks to long-term sustainability.
Evolution of Financial Ratios
Over the past five years, Cloudflare’s financial ratios have shown a mixed trend. Liquidity ratios have generally decreased, with the current ratio dropping from 7.99 in 2020 to 2.86 in 2024, reflecting increasing financial strain. Profitability remains a concern, with net profit margins consistently negative, underlining ongoing operational challenges.
Distribution Policy
Cloudflare, Inc. (ticker: NET) does not currently pay dividends, reflecting a reinvestment strategy focused on growth rather than immediate shareholder payouts. The company is in a high-growth phase, prioritizing research and development and strategic acquisitions. Notably, Cloudflare engages in share buybacks, which can signal confidence in its long-term value creation potential. However, this approach must be balanced with risk management, ensuring sustainable shareholder value over time.
Sector Analysis
Cloudflare, Inc. (ticker: NET) operates in the Software – Infrastructure sector, providing comprehensive cloud services and security solutions. Its competitive edge lies in innovative product offerings and a robust market position against peers.
Strategic Positioning
Cloudflare, Inc. (ticker: NET) holds a significant position within the Software – Infrastructure sector, boasting a market capitalization of approximately $70.39B. The company is a leading provider of integrated cloud-based security solutions, with an extensive array of services designed to meet diverse business needs across various industries such as technology, healthcare, and finance. Despite competitive pressure from both established players and emerging startups, Cloudflare’s innovative offerings, including advanced DDoS protection and performance optimization tools, help maintain its competitive edge. However, the rapid pace of technological disruption necessitates constant adaptation and vigilance in risk management to sustain and grow market share.
Revenue by Segment
The pie chart illustrates the revenue contributions by segment for Cloudflare, Inc. during the fiscal year 2024.
In the fiscal year 2024, the primary revenue source for Cloudflare was the Reportable Segment, generating approximately $1.67B. This segment is the backbone of the company’s financial performance, and its growth trajectory indicates strong market demand. However, with only one segment reported, there is a lack of diversity, potentially raising concentration risk. As the company continues to scale, it will be crucial to monitor how this segment evolves in terms of profitability and market dynamics moving forward.
Key Products
Cloudflare, Inc. offers a diverse range of products designed to enhance security, performance, and reliability for businesses worldwide. Below is a table summarizing some of their key products:
| Product | Description |
|---|---|
| Cloud Firewall | A comprehensive security solution that protects applications from threats and unauthorized access. |
| Bot Management | Tools to detect and manage bot traffic, ensuring fair usage of resources and preventing abuse. |
| Distributed Denial of Service (DDoS) Protection | Services that safeguard websites from DDoS attacks, ensuring availability during high traffic periods. |
| Content Delivery Network (CDN) | Accelerates the delivery of content to users by caching it at strategic locations worldwide. |
| Load Balancing | Distributes incoming traffic across multiple servers to enhance performance and reliability. |
| SSL/TLS Encryption | Secure communication between users and applications through encryption protocols, enhancing data security. |
| Serverless Computing | A platform that allows developers to run code without managing servers, simplifying application deployment. |
| Consumer DNS Resolver | A free service that enhances browsing speed and security for individual users. |
| Consumer VPN | A service that secures and accelerates internet traffic for mobile devices, protecting user privacy. |
| Analytics | Tools that provide insights into traffic patterns and user behavior to optimize performance. |
These products position Cloudflare as a leader in the cloud services industry, catering to various sectors including technology, healthcare, and finance.
Main Competitors
The competitive landscape for Cloudflare, Inc. (ticker: NET) is robust, featuring several prominent players in the software infrastructure sector.
| Company | Market Cap |
|---|---|
| Cadence Design Systems, Inc. | 92B |
| NetEase, Inc. | 89B |
| Synopsys, Inc. | 87B |
| Marvell Technology, Inc. | 85B |
| Snowflake Inc. | 77B |
| Cloudflare, Inc. | 70B |
| Corning Incorporated | 74B |
| Fortinet, Inc. | 66B |
| MicroStrategy Incorporated | 51B |
| CoreWeave, Inc. Class A Common Stock | 44B |
| Zscaler, Inc. | 38B |
These companies primarily operate in the North American market, providing an array of technology and software solutions that compete with Cloudflare’s offerings in cloud security and infrastructure services.
Competitive Advantages
Cloudflare, Inc. (Ticker: NET) possesses significant competitive advantages through its comprehensive suite of cloud-based security and performance solutions. The company’s integrated offerings address a wide range of platforms, making it a one-stop solution for businesses. Looking ahead, Cloudflare’s expansion into new markets and continuous development of innovative products—such as serverless computing and advanced analytics—position it well for future growth. With a strong focus on scalability and reliability, Cloudflare is poised to capture emerging opportunities in sectors like IoT and cybersecurity, enhancing its market leadership.
SWOT Analysis
The SWOT analysis provides a strategic overview of Cloudflare, Inc. (ticker: NET) to help assess its current market position.
Strengths
- Leading cloud security solutions
- Strong brand recognition
- Diverse customer base
Weaknesses
- High operational costs
- Limited dividend payouts
- Dependency on a few large clients
Opportunities
- Expansion into emerging markets
- Growing demand for cybersecurity
- Innovations in cloud technology
Threats
- Intense competition
- Regulatory challenges
- Economic downturns
The overall SWOT assessment indicates that Cloudflare holds a strong position in the cloud services market but must address its weaknesses and threats proactively. By capitalizing on emerging opportunities, the company can enhance its growth strategy while managing risks effectively.
Stock Analysis
Over the past year, Cloudflare, Inc. (ticker: NET) has exhibited significant price movements, culminating in a robust bullish trend. The stock has experienced notable fluctuations, reflecting dynamic trading activity and investor sentiment.
Trend Analysis
Analyzing the price performance over the last 12 months, Cloudflare’s stock has seen a remarkable increase of 153.18%. This substantial percentage change indicates a bullish trend. However, it is important to note that the recent performance from September 21, 2025, to December 7, 2025, shows a decline of 11.06%, suggesting a deceleration in momentum. The stock reached a peak price of 253.3 and a low of 67.69 during this period. The overall trend is characterized by a standard deviation of 51.66, indicating moderate volatility.
Volume Analysis
In terms of trading volume over the last three months, the overall activity suggests a slightly seller-dominant environment, with buyer volume at 1.02B and seller volume at 838M, resulting in a buyer percentage of 54.43%. However, the volume trend is decreasing, with a recent period showing buyer volume at approximately 75M against seller volume at 87M, indicating a shift towards a more seller-driven sentiment. This decline may reflect caution among investors and reduced market participation.
Analyst Opinions
Recent analyst recommendations for Cloudflare, Inc. (NET) indicate a cautious stance, with a consensus rating of “Sell.” Analysts highlight concerns over the company’s D+ rating, reflecting weak performance across key metrics such as return on equity and price-to-earnings ratios. Notably, analysts have expressed skepticism about NET’s ability to generate consistent profits and manage debt effectively. This outlook suggests that investors should carefully assess their positions and consider risk management strategies before making any investment decisions in 2025.
Stock Grades
Cloudflare, Inc. (NET) has received consistent evaluations from several reputable grading companies, indicating a stable outlook for the stock.
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Argus Research | maintain | Buy | 2025-11-10 |
| Citigroup | maintain | Buy | 2025-11-03 |
| Susquehanna | maintain | Neutral | 2025-11-03 |
| Cantor Fitzgerald | maintain | Neutral | 2025-10-31 |
| UBS | maintain | Neutral | 2025-10-31 |
| Stifel | maintain | Buy | 2025-10-31 |
| Needham | maintain | Buy | 2025-10-31 |
| Keybanc | maintain | Overweight | 2025-10-31 |
| Citizens | maintain | Market Outperform | 2025-10-31 |
| Mizuho | maintain | Outperform | 2025-10-31 |
Overall, the trend in grades for Cloudflare, Inc. is predominantly positive, with multiple “Buy” ratings indicating strong confidence from analysts. However, the presence of neutral ratings suggests a level of caution that investors should consider when evaluating their investment strategy.
Target Prices
The consensus among analysts for Cloudflare, Inc. (NET) indicates a promising outlook.
| Target High | Target Low | Consensus |
|---|---|---|
| 300 | 220 | 254.5 |
Overall, analysts expect Cloudflare’s stock to reach a consensus target price of 254.5, reflecting a balanced mix of optimism and caution in their projections.
Consumer Opinions
Consumer sentiment regarding Cloudflare, Inc. (NET) showcases a mix of appreciation for its services and concerns about its pricing.
| Positive Reviews | Negative Reviews |
|---|---|
| “Reliable performance and uptime.” | “Pricing is higher than competitors.” |
| “Excellent customer support.” | “Complex interface for new users.” |
| “Great security features.” | “Occasional service outages reported.” |
| “User-friendly integration options.” | “Limited customization for advanced users.” |
Overall, consumer feedback highlights Cloudflare’s strong performance and customer support as key strengths, while pricing and interface complexity are noted as areas for improvement.
Risk Analysis
In evaluating Cloudflare, Inc. (ticker: NET), I’ve identified several key risks that could affect its performance and market position. Below is a summary of these risks:
| Category | Description | Probability | Impact |
|---|---|---|---|
| Market Competition | Intense competition from larger tech firms. | High | High |
| Cybersecurity Threats | Increasing sophistication of cyber attacks. | High | Very High |
| Regulatory Changes | Potential new regulations affecting operations. | Medium | High |
| Economic Downturn | Global economic instability impacting spending. | Medium | Medium |
| Technology Obsolescence | Rapid tech changes may outpace Cloudflare’s offerings. | Medium | High |
The most significant risks for NET are cybersecurity threats and market competition, as they can severely impact both revenue and reputation. For instance, a major breach could lead to substantial financial losses and customer distrust.
Should You Buy Cloudflare, Inc.?
Cloudflare, Inc. (ticker: NET) has demonstrated significant challenges in profitability, as reflected by a negative net income of -78.8M in FY 2024 and an ebit margin of -21.11%. The company’s current debt situation is concerning, with a total debt of 1.46B and a debt-to-equity ratio of 2.09, indicating high leverage. The fundamentals have shown an overall deterioration, with the company’s rating being a low D+. Given these factors, it might be prudent for investors to exercise caution and consider the associated risks before making any decisions regarding investment in Cloudflare.
Favorable signals
The data indicates several favorable elements for Cloudflare, Inc. (NET). The company has demonstrated impressive revenue growth of 28.76% and a strong gross margin of 77.32%. Additionally, the gross profit growth stands at 30.43%, while the EBIT margin growth is a positive 72.33%. The interest expense as a percentage of revenue is favorable at 0.31%, and EPS growth is also notable at 58.18%. Furthermore, the current ratio of 2.86 indicates good liquidity.
Unfavorable signals
Despite the favorable elements, there are significant unfavorable signals present. The net margin is negative at -4.72%, and the EBIT margin is also unfavorable at -3.93%. The return on equity (ROE) is negative at -7.53%, and the return on invested capital (ROIC) is -6.61%, indicating value destruction as it is less than the weighted average cost of capital (WACC) of 12.72%. The price-to-book (PB) ratio is unfavorable at 35.14, and the interest coverage ratio is negative at -12.64. Additionally, the company has a debt-to-equity ratio of 1.4, which is also unfavorable.
Conclusion
Considering the favorable income statement evaluation but unfavorable ratios, it appears that Cloudflare, Inc. might be facing challenges in its financial health. The negative long-term trend suggests that it may be preferable to wait for buyers to return before making investment decisions.
Disclaimer: This article is not financial advice. Each investor is responsible for their own investment decisions.
Additional Resources
- Cloudflare, Inc. (NET): A Bull Case Theory – Yahoo Finance (Dec 04, 2025)
- First Trust Advisors LP Sells 162,912 Shares of Cloudflare, Inc. $NET – MarketBeat (Dec 04, 2025)
- Net Stock Forecast: How Far Could Cloudflare Shares Drop in 2025? – Forbes (Dec 03, 2025)
- Cloudflare (NYSE:NET) Stock Moves Up After Security Expansion – Kalkine Media (Dec 05, 2025)
- Barclays Initiates Coverage of Cloudflare (NET) with Overweight Recommendation – Nasdaq (Dec 03, 2025)
For more information about Cloudflare, Inc., please visit the official website: cloudflare.com
