Stock of Cloudflare Soars as Earnings Beat Captures "Robust Momentum"

Cloudflare Inc. experienced an 8% surge in its stock during Thursday's regular trading session, and the company is poised for additional substantial gains after exceeding expectations in its latest financial results. In the extended session on Thursday, the stock soared by 24%, propelled by what Cloudflare deemed as "exceptionally strong" results for the December period.

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For the fourth quarter, the cybersecurity and software company reported a net loss of $27.9 million, or 8 cents per share, marking a notable improvement from the year-ago period when it incurred a loss of $45.9 million, or 14 cents per share. On an adjusted basis, Cloudflare's earnings stood at 15 cents per share, compared to 6 cents per share in the corresponding period a year earlier. Analysts surveyed by FactSet had anticipated earnings of 12 cents per share. The company's revenue for the quarter climbed by 32% to $363 million, surpassing analysts' expectations of $353 million.

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Cloudflare witnessed significant improvements in pipeline close rates, sales-force productivity, and average deal size on a sequential basis, according to Chief Executive Matthew Prince. He noted that the strength in the business was driven by momentum with large customers, progress in the public sector, and growth in Cloudflare One. Despite macroeconomic uncertainties, Prince highlighted that the company's business was operating efficiently, with customers continuing to spend.

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Piper Sandler analyst James Fish expressed a positive view of the report, emphasizing Cloudflare's outperformance on remaining performance obligations (RPO) and traction on non-RPO metrics. While acknowledging the favorable aspects of the report and the company's recent execution, Fish maintained a neutral stance on the stock, awaiting a more attractive entry point.

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Cloudflare's outlook for the current quarter includes revenue projections of $372.5 million to $373.5 million, accompanied by adjusted earnings per share of 13 cents. This outlook exceeded the FactSet consensus, which anticipated $372 million in revenue and 12 cents per share. Looking ahead to the full year, Cloudflare anticipates revenue in the range of $1.648 billion to $1.652 billion, with adjusted earnings per share between 58 cents and 59 cents.

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Again, this outlook surpassed the FactSet consensus, which predicted $1.65 billion in revenue and 54 cents in adjusted earnings per share. The company's positive performance and optimistic outlook have positioned it for further market success in the coming quarters.

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