Cloudflare cuts 20 percent of its jobs and grows 36 percent at the same time

Cloudflare generated revenue of 696.1 million dollars in the second quarter of 2026, up 35.9 percent on the year before. Around 665 million dollars had been expected. The share rose 14.9 percent.

Adjusted earnings came in at 29 cents per share against an estimate of 27 cents. Adjusted operating profit reached 96.1 million dollars at a margin of 13.8 percent.

Under the full accounting rules the loss by contrast widened considerably, from 50.4 million dollars in the year earlier quarter to 170.0 million dollars or 48 cents per share. The operating loss rose to 205.7 million dollars, which corresponds to 29.6 percent of revenue.

The short version

• Revenue rose 35.9 percent in the second quarter of 2026 to 696.1 million dollars, and the share gained 14.9 percent.
• Restructuring costs of 150.7 million dollars fell in the quarter, and the reported loss widened to 170.0 million dollars.
• The group is converting its operations to a model built around programs that work on their own and is cutting around 20 percent of its jobs.

150.7 million dollars for the restructuring

The difference is explained almost entirely by one item. Restructuring costs of 150.7 million dollars fell in the quarter.

The background is a decision of 7 May. The group announced that it would convert its operations to a model in which programs that work on their own stand at the centre. Around 20 percent of jobs are being cut in the process. Total costs of that plan are estimated at up to 165 million dollars.

A cut of that size alongside 36 percent revenue growth is unusual. It describes not a response to weak business but a change in how the work is done.

The margin is under pressure

A second point concerns the gross margin. Under accounting rules it fell from 74.9 to 71.8 percent, and on an adjusted basis from 76.3 to 73.1 percent.

Cloudflare therefore shows the same pattern as other software providers. Programs that carry out tasks on their own consume considerably more computing time than classic applications. Whoever supplies that capacity gives part of the revenue to the infrastructure.

At ServiceNow the same effect led the share to fall 6.47 percent at first after beaten targets. At Cloudflare the reaction went the other way, because guidance was raised clearly.

For its network the group plans investment of 14 to 15 percent of revenue.

Guidance raised across the board

The outlook came in better than expected on every measure. For the third quarter revenue of 736 to 737 million dollars is expected, against estimates of around 721 million. Adjusted operating profit is to be 129 to 130 million dollars and earnings per share 34 cents.

For the full year revenue guidance was raised to 2.864 to 2.870 billion dollars, after around 2.81 billion previously. Adjusted operating profit is to reach 443 to 445 million dollars and earnings per share 1.25 to 1.26 dollars.

What matters is the nature of the increase. It comes from revenue and not from cost savings. Such increases count as more reliable among analysts, because they point to the order book and not to one off effects.

The current portion of the order book grew 35 percent.

Four billion dollars of cash

On 30 June Cloudflare held 1.66 billion dollars of cash and 2.50 billion dollars of marketable securities, together 4.16 billion dollars. On top of that comes an undrawn credit line of 400 million dollars.

Free cash flow was 56.4 million dollars, an increase of 69 percent, which corresponds to eight percent of revenue. Operations produced 117.6 million dollars.

The accumulated deficit stood at 1.40 billion dollars.

Before the figures the share had traded at 48 times revenue at a record high. Analysts had pointed out that merely beating expectations would not be enough at that valuation.

Frequently asked questions

Why does the loss widen even though the business grows

The difference is explained almost entirely by one item. Restructuring costs of 150.7 million dollars fell in the quarter. The background is a decision of 7 May to convert operations to a model built around programs that work on their own and to cut around 20 percent of jobs.

Why is the gross margin under pressure

Under accounting rules it fell from 74.9 to 71.8 percent, and on an adjusted basis from 76.3 to 73.1 percent. Programs that carry out tasks on their own consume considerably more computing time than classic applications. Whoever supplies that capacity gives part of the revenue to the infrastructure.

Why does the raised guidance count as reliable

Because it comes from revenue and not from cost savings. Such increases count as more reliable among analysts, because they point to the order book and not to one off effects. The current portion of the order book grew 35 percent.

This analysis is for information only and is not investment advice.