Cloudflare Q2 2022 Earnings Drive Stocks Rising

Cloudflare co-founder and CEO Matthew Prince speaks on stage at TechCrunch Disrupt Berlin on December 12, 2019 in Berlin, Germany.

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Shares of Cloudflare rose a staggering 27% on Friday after the content distribution network and security provider announced second-quarter results and full-year outlook that beat analysts’ forecasts.

Revenue rose 54% from a year earlier to $234.5 million, maintaining the growth rate of three months earlier, despite a slowdown in other parts of the tech industry. Analysts expected revenue of $227.3 million, according to Refinitiv.

The company said it has added a record number of customers paying more than $100,000 a year, and management raised its forecast for 2022, calling for about 48% growth.

“In the first quarter, our pipeline generation slowed, sales cycles lengthened and customers took longer to pay their bills,” Cloudflare CEO Matthew Prince told analysts during the earnings call. “We’ve been watching those stats closely during the second quarter and saw them all at least stabilize. They’re not where we’re having a parade yet, but the stats are going in the right direction.”

The results prompted several analysts to lift their price targets for the stock. RBC analysts raised their target, writing in a note to customers that while no company is recession-proof, Cloudflare is better equipped than others to withstand economic pressures.

Cloudflare is one of several cloud software companies that are more attractive to investors, who have cycled out of the industry in the first half of the year. Along with Cloudflare, Paylocity and ZoomInfo are also up more than 25% so far in August.

Analysts polled by FactSet now have an average price target of about $92 per share. That’s well below Cloudflare’s record of $217.25 set in November, but above its current price of about $73.

Not all analysts are so optimistic. Citigroup analysts maintained their hold rating, saying the stock is “much more demanding on valuation levels compared to our profitable hypergrowth names” such as CrowdStrik, Atlassian and Datadog.

Even as revenue increased, Cloudflare’s net loss rose to nearly $64 million, from $35 million in the same quarter a year ago. Prince said the company has changed its “go-to-market message” during the downturn and is focused on helping customers save money and “consolidate spending from multi-point solution providers behind Cloudflare’s broad platform.”

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