Despite Beating Q1 Expectations, Cloudflare Crashes 10%

Cloud computing company Cloudflare, Inc. (NYSE: NET) has reported stronger-than-expected results for the first quarter ended March 31, 2022. Significant topline growth marked the solid results of the company.

However, following the upbeat earnings, shares of the company declined 9.4% to close at $70.50 in Thursday’s extended trading session. The decline can be somewhat attributed to selloffs witnessed in software stocks.

Revenue & Earnings

Cloudflare’s quarterly revenues came in at $212.2 million, up 54% year-over-year. Further, the figure topped the consensus estimate of $205.65 million. The revenue growth was primarily due to the addition of 14,000 new paying customers, taking the total number of paying customers to 154,109.

The company reported earnings of $0.01 per share for the quarter, which compares favorably to a loss of $0.03 per share reported in the prior-year quarter and analysts’ expectations of $0.

Other Operating Metrics

Cloudflare reported a dollar-based net retention rate of 127%, up from 123% year-over-year. However, the company reported a net cash outflow from operating activities of $35.5 million, wider than the previous year’s figure of $23.5 million.

Outlook

For the second quarter, the company forecasts earnings between ($0.01) and $0.00 and revenues in the range of $226.5 million-$227.5 million.

For full-year 2022, Cloudflare anticipates earnings in the range of $0.03-$0.04 per share and revenues between $955 million-$959 million.

Management Commentary

The CEO of Cloudflare, Matthew Prince, said, “Cloudflare had a terrific first quarter of 2022, beating expectations with revenue growth up 54% year-over-year and adding more than 14,000 new paying customers—a quarterly record. Our largest customers continue to get larger, with those spending over $1M a year growing 72 percent year-over-year. The key to our success and customer expansion is innovating at an unrelenting pace, and continued interest in consolidating behind a single vendor that can power multiple network services at scale.”

Stock Rating

The Wall Street community is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on nine Buys and eight Holds. NET’s average price target of $148.13 implies that the stock has upside potential of 90.4% from current levels. Shares have gained 12.7% over the past year.

Website Traffic

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into Cloudflare’s performance this quarter.

According to the tool, the Cloudflare website recorded a 23.35% monthly rise in global visits in March, compared to February. Further, the footfall on the company’s website has increased 102.84% year-to-date, compared to the previous year.

Prior to the results, Cloudflare’s rising website traffic activity during the period hinted at the fact that the company was well-positioned to report a strong quarter. This shows that TipRanks’ website traffic tool helps in making reliable predictions about a company’s performance.

Conclusion

Cloudflare’s rising customer base and topline growth marked its solid results for the quarter. Moreover, the company’s strong guidance for the future is a tailwind.

Learn more about the Website Traffic tool in this video by Youtube sensation Tom Nash.

Related News:
Marriott Comforts Investors with Upbeat Q1 Results
Lockdown in China Leaves Yum! Brands With a Sour Taste
Etsy’s Muted Q2 Guidance Spooks Investors