--- title: "Cloudflare’s revenue grew 39%; its gross margin fell to 71.2%" summary: "Cloudflare’s results and filings for July to September: what grew, what it now costs to deliver, and why its fastest growth since 2022 came with a lower gross margin." url: https://www.thetechbag.com/blog/cloudflare-grows-39-margin-falls format: Note desk: "Cloud & DevOps" region: Global published: 2026-11-06 facts_checked: 2026-11-06 author: TechBag (The TechBag Journal) tags: ["Cloudflare","earnings","gross margin","cost of revenue","Workers","developer platform","AI inference","agentic AI","free cash flow","net retention","guidance","share price"] cover: https://www.thetechbag.com/blog/covers/cloudflare-grows-39-margin-falls.png --- # Cloudflare’s revenue grew 39%; its gross margin fell to 71.2% *Cloudflare’s results and filings for July to September: what grew, what it now costs to deliver, and why its fastest growth since 2022 came with a lower gross margin.* Note · Cloud & DevOps · By TechBag · Published 2026-11-06 · Facts checked 2026-11-06 · Canonical: https://www.thetechbag.com/blog/cloudflare-grows-39-margin-falls Cloudflare’s revenue rose 39% to US$782.5m in the three months to September, and its GAAP gross margin fell to 71.2% from 74.0% a year earlier (72.4% from 75.3% on its non-GAAP measure, which leaves out stock pay).[1] The growth was its fastest since October–December 2022, when revenue rose 42%; every quarter in between grew less.[1][3] It expects US$845–846m in October–December, about 38% more than a year earlier.[1][2] Its shares had closed 8.3% lower at US$244.51 on 5 November, before the results;[7] they rose more than 14% in trading before the market opened on 6 November, Investing.com reported.[8] **Figure: Cloudflare's growth climbed from 27% to 39% in six quarters, its fastest since late 2022** *Cloudflare revenue by quarter, US$ million, and growth on the same quarter a year earlier, %, Jul–Sep 2024 to the Oct–Dec 2026 guidance* | | Revenue (US$m) | Change on a year earlier (%) | | --- | --- | --- | | Q3 24 | 430.1 | 28 | | Q4 24 | 459.9 | 27 | | Q1 25 | 479.1 | 27 | | Q2 25 | 512.3 | 28 | | Q3 25 | 562 | 31 | | Q4 25 | 614.5 | 34 | | Q1 26 | 639.8 | 34 | | Q2 26 | 696.1 | 36 | | Q3 26 | 782.5 | 39 | | Q4 26 guide | 845.5 | 37.6 | Source: Cloudflare quarterly results releases (8-K Exhibit 99.1), 7 Nov 2024 to 5 Nov 2026 · as of 5 November 2026 · Q4 26 is the midpoint of the US$845–846m guidance; its growth is TechBag arithmetic ## What grew Cloudflare runs one global network and sells three kinds of service on it: protection and speed for websites and apps (DDoS defence, a web application firewall, caching), Zero Trust access for a company’s staff, and the Workers developer platform, where customers run their own code and AI models on its servers. Its chief financial officer, Thomas Seifert, credited the quarter to “rapid growth in our Workers Developer Platform and agentic workloads across our network”, its largest customers, and sales execution, he said on the call.[4] Customers paying more than US$100,000 a year rose to 5,006 from 4,009, and existing customers spent 22% more than a year earlier (a dollar-based net retention rate of 122%, from 119%). US revenue rose 44%, to 52% of the total; Asia Pacific rose 32%, to 14%.[2][4] Cloudflare added more than 158,000 paying customers in the quarter, nearly double its previous record, and passed 10 million active developers, the chief executive, Matthew Prince, said on the call.[4] ## What it costs to deliver 71.2% GAAP gross margin, from 74.0% a year earlier 8-K +54% cost of revenue, against revenue's +39% 10-Q 17.5% non-GAAP operating margin, from 15.3% 8-K 10% free-cash-flow margin, from 13% 8-K Cost of revenue rose US$79.0m, or 54%, to US$225.3m. The 10-Q names three causes: US$43.0m more in “third-party technology services costs”, US$19.4m more for co-location, network and bandwidth to serve more customers and add capacity, and US$10.1m more depreciation from buying and deploying servers. The margin fell “primarily due to” those increases, it says.[2] Spending on property and equipment was US$121.8m, 16% of revenue, against 15% a year earlier. Free cash flow, operating cash less that spending and capitalised software, rose 9% to US$82.1m while operating cash rose 29%.[1] Cloudflare gives two more reasons. Its developer products “currently carry a lower gross margin than our corporate average”, Seifert said in May, and as free traffic on its network becomes paid traffic, the network cost of serving it moves out of sales and marketing and into cost of revenue: “literally a wash from an overall P&L perspective.”[5] On 5 November he put Workers among products with “slightly lower gross margins, but significantly lower cost to book”, and said engineers are working to use its computing more efficiently.[4] ReportedThe target range moved A year ago Cloudflare called its non-GAAP gross margin of 75.3% “within our long-term target range of 75% to 77%”.[6] On 5 November it called 72.4% “within our target long-term range of 70%-77%”.[4] Its GAAP gross margin peaked at 77.8% in April–June 2024.[3] ## Why the lower margin came with more profit Operating expenses fell to 55% of revenue from about 60% on Cloudflare’s non-GAAP measure, so operating margin rose even as gross margin fell; Seifert tied the expansion to Workers’ growth and said Cloudflare now expects a GAAP profit in October–December, earlier than the 2028 it had set as the latest date.[4] On a GAAP basis the quarter was still a loss from operations of US$67.9m, including US$11.0m of restructuring and other charges.[1] In May, Cloudflare announced a plan to cut about 1,100 jobs.[9] What to watch in February: whether the gross margin holds near 71% while Workers grows, and whether the GAAP profit arrives. How we did this Figures as of 6 November 2026, 7pm IST Revenue, growth and gross margins are from Cloudflare’s results releases, one per quarter; the cost bridge, customers, retention and regions are from its 10-Q. Gross margin is GAAP unless marked non-GAAP. Quotes are from the calls of 5 November and 7 May and the call of 30 October 2025, read in transcripts. The guidance quarter’s growth and the US$3.1bn annual run rate (third-quarter revenue times four; Cloudflare says it crossed US$3bn) are our arithmetic. The 5 November close is from Nasdaq’s historical prices; regular US trading on 6 November had not opened. Spotted an error? Write to us; corrections are published at the foot of the piece. Sources 1. [Cloudflare, Cloudflare Announces Third Quarter 2026 Financial Results (8-K, Exhibit 99.1)](https://www.sec.gov/Archives/edgar/data/1477333/000147733326000060/q326exhibit991.htm) — 5 November 2026 2. [Cloudflare, quarterly report on Form 10-Q, quarter to 30 September 2026](https://www.sec.gov/Archives/edgar/data/1477333/000147733326000061/cloud-20260930.htm) — 5 November 2026 3. [Cloudflare, quarterly results releases (8-K, Exhibit 99.1), Q4 2022 to Q2 2026 (Q2 2026 shown)](https://www.sec.gov/Archives/edgar/data/1477333/000147733326000053/q226exhibit991.htm) — 9 February 2023 to 6 August 2026 4. [The Motley Fool, Cloudflare (NET) Q3 2026 Earnings Call Transcript (Matthew Prince, Thomas Seifert)](https://www.fool.com/earnings/call-transcripts/2026/11/06/cloudflare-net-q3-2026-earnings-call-transcript/) — 6 November 2026 5. [Cloudflare, Q1 2026 earnings call, corrected transcript (FactSet CallStreet)](https://cloudflare.net/files/doc_financials/2026/q1/CORRECTED-TRANSCRIPT-Cloudflare-Inc-NET-US-Q1-2026-Earnings-Call-7-May-2026-5-00-PM-ET.pdf) — 7 May 2026 6. [Cloudflare, Q3 2025 earnings call, corrected transcript (FactSet CallStreet)](https://cloudflare2019ipo.q4web.com/files/doc_financials/2025/q3/CORRECTED-TRANSCRIPT_-Cloudflare-Inc-NET-US-Q3-2025-Earnings-Call-30-October-2025-5_00-PM-ET.pdf) — 30 October 2025 7. [Nasdaq, NET historical prices (close, 4 and 5 November 2026)](https://www.nasdaq.com/market-activity/stocks/net/historical) — 5 November 2026 8. [Investing.com, Cloudflare shares leap after blowout Q3 results, strong forecast (Luke Juricic)](https://www.investing.com/news/earnings/cloudflare-shares-soar-afterhours-on-blowout-q3-results-strong-forecast-5005697) — 5 November 2026, updated 6 November 9. [Cloudflare, Cloudflare Announces First Quarter 2026 Financial Results (8-K, Exhibit 99.1)](https://www.sec.gov/Archives/edgar/data/1477333/000147733326000033/q126exhibit991.htm) — 7 May 2026 **Disclosure.** TechBag is a software reseller: it earns a margin when a reader buys through it, including from vendors named here. The analysis is TechBag’s own; no vendor paid for or saw this piece before publication. Facts are labelled reported, TechBag count or our view. **Read this next:** [Supermicro’s sales grew 298% at a 13% margin; Arista’s grew 58% at 64%](https://www.thetechbag.com/blog/ai-hardware-suppliers-revenue-who-keeps-margin) — Growth against margin one step up the chain: Supermicro’s sales grew 298% at a 13% margin, Arista’s 58% at 64%. Go deeper on TechBag - [The Cloudflare hub](https://www.thetechbag.com/cloudflare) — Cloudflare's products, with dated, sourced claims - [Cloudflare Developer Platform (Workers)](https://www.thetechbag.com/cloudflare/cloudflare-developer-platform) — the lower-margin, fastest-growing business in this quarter - [Zero trust access guide](https://www.thetechbag.com/browse/network-security-sase/zero-trust-access) — Cloudflare One against the other Zero Trust products