Cloudflare (NET) Balances Soaring Sales and Widening Losses—How Long Can This Growth Trade Last?

• Cloudflare recently reported its second quarter 2025 financial results, recording US$512.32 million in sales, a sharp increase from US$401 million a year earlier, while net losses also widened to US$50.45 million.
• This performance underscores Cloudflare’s rapid top-line expansion but also highlights increased spending and a continued lack of profitability as management invests heavily in future growth.
• We'll look at how Cloudflare's strong revenue growth and sustained losses shape its investment narrative amid rising industry competition.

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What Is Cloudflare's Investment Narrative?

To be a shareholder in Cloudflare, I think you have to believe in the long-term value of rapid revenue growth, even if profitability remains elusive for now. This most recent quarter confirms massive top-line expansion, with sales jumping to over US$512 million, but it also brought sharply wider net losses, as Cloudflare continues to ramp up investment. This choice keeps the company at the forefront of its industry but makes its expensive valuation and lack of profits even more important to the story. The new Q3 and full-year revenue guidance reinforce that top-line growth still matters most, so the near-term catalyst remains execution on this growth. Given these results, the risk balance may be shifting toward whether ongoing losses and a high sales multiple start to weigh on sentiment more materially, at least in the short term, though recent share price gains suggest the market was expecting even better margins or stronger guidance.

But here's where pressure on margins could become more significant than many realize. Cloudflare's shares are on the way up, but could they be overextended? Uncover how much higher they are than fair value.

Exploring Other Perspectives

Twenty-eight members from the Simply Wall St Community suggest Cloudflare's fair value ranges widely, from just over US$11 to around US$208 per share. While some see opportunity at the high end, others highlight possible downside, stressing the debate over Cloudflare’s premium price tag and the company’s ongoing losses. Such different views show that confidence in sustained growth, despite unprofitability, remains an open question.

Explore 28 other fair value estimates on Cloudflare - why the stock might be worth as much as $208.49!

Build Your Own Cloudflare Narrative

Disagree with this assessment? Create your own narrative in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Cloudflare research is our analysis highlighting 1 key reward and 1 important warning sign that could impact your investment decision.
• Our free Cloudflare research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Cloudflare's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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