Key Highlights

● Revenue was $696.1 million, up 36% from $512.3 million a year earlier.

● Restructuring and other charges totalled $150.7 million in the quarter.

● GAAP net loss widened to $170.0 million from $50.4 million a year earlier.

● Cloudflare guides to 2026 revenue of $2,864.0 million to $2,870.0 million.

Growth alongside restructuring

Cloudflare, Inc. (NYSE:NET) announced second-quarter 2026 results on 6 August 2026, reporting revenue of $696.1 million, up 36% from $512.3 million a year earlier. The same release disclosed $150.7 million of restructuring and other charges and referred to a plan to accelerate the company's move to an agentic artificial intelligence first operating model, including an estimated reduction of its current workforce. The combination of faster growth and organisational change is the main point of interest in the report. The release gave no total for the workforce reduction, so its scale remains to be clarified by the company.

Business and sector position

Cloudflare operates a global network that provides security, performance and reliability services for websites, applications and corporate networks, and offers a developer platform for building and running applications at the network edge. It competes with content delivery, cybersecurity and cloud computing providers. Chief executive Matthew Prince said the business model of the web is changing and that Cloudflare is well placed to help define its future. Its customers range from individual developers and small businesses to large enterprises, and the company sells on subscription and usage terms, so demand tends to track internet traffic and security spending.

What the latest report showed

Cloudflare described the quarter as stellar, citing revenue acceleration and record growth in paying customers, large customers and developers, although the release did not give counts for those groups. Current remaining performance obligations grew 35% year on year. Non-GAAP gross margin was 73.1%, compared with 76.3% in the second quarter of 2025, a decline that is visible in the reported figures even though the release does not attribute a cause. Large customer counts and dollar-based net retention were not stated in the release. Management said that revenue growth had accelerated.

Financial performance and context

The GAAP net loss was $170.0 million, or $0.48 per share, against $50.4 million a year earlier, and the six-month net loss was $192.9 million. Non-GAAP income from operations was $96.1 million, a 13.8% margin compared with 14.1% a year earlier, and non-GAAP net income was $107.8 million. Free cash flow was $56.4 million, or 8% of revenue, up from $33.3 million. Cash and investments totalled $4,162.8 million, while convertible notes carried a net value of $3,270.3 million. Six-month results therefore include a loss of $192.9 million, meaning that nearly all of it arose in the second quarter, when the restructuring charge was recorded. The restructuring and other charges of $150.7 million are a large part of the difference between the GAAP and non-GAAP results.

Risks and uncertainties

Restructuring can disrupt operations, and the benefits of an agent-led operating model are unproven. The fall in non-GAAP gross margin and the widening GAAP loss show that growth is not translating evenly into profitability. Convertible notes of $3,270.3 million, of which $1,293.3 million is current, create future settlement obligations. Competition from larger cloud providers and changes in how web traffic is generated could each affect outcomes. Any reorganisation around artificial intelligence also depends on technology that is itself changing quickly.

What the restructuring may change

Cloudflare guides to third-quarter revenue of $736.0 million to $737.0 million, non-GAAP income from operations of $129.0 million to $130.0 million and non-GAAP earnings per share of $0.34. For 2026 it expects revenue of $2,864.0 million to $2,870.0 million, non-GAAP operating income of $443.0 million to $445.0 million and earnings per share of $1.25 to $1.26. Developments to follow include the scale and timing of the workforce changes, the margin trend and disclosure of customer metrics. The next quarterly report will show whether revenue growth stays near the 2026 outlook implied by these ranges.