Cloudflare (NYSE:NET) reported second-quarter 2026 revenue of $696.1 million, up 36% from a year earlier, as the company cited accelerating customer growth, expanding adoption of its Workers developer platform, and demand for products supporting AI-related workloads.
Chief Executive Officer Matthew Prince said the company added more than 80,000 paying customers during the quarter, bringing year-over-year paying-customer growth to 74%. Cloudflare ended the period with 4,698 customers spending more than $100,000 annually, a 27% increase from the prior year. The company added 282 such large customers during the quarter and 986 over the past 12 months, its highest annual net addition total for that customer segment.
Profitability, Cash Flow and Outlook
Cloudflare reported non-GAAP operating income of $96.1 million, up 33% from $72.3 million a year earlier. Its non-GAAP operating margin was 13.8%, improving 240 basis points sequentially but declining 30 basis points year over year.
Gross margin was 73.1%, up 30 basis points from the first quarter and down 320 basis points from a year earlier. Chief Financial Officer Thomas Seifert said the company continued to see more network costs allocated to cost of revenue as paid traffic grew relative to free traffic, although he said that trend was beginning to stabilize. Seifert said Cloudflare expects gross margin to stabilize around current levels, while total unit economics improve through the remainder of the year.
Free cash flow was $56.4 million, or 8% of revenue, compared with $33.3 million, or 6% of revenue, in the prior-year period. Cloudflare ended the quarter with $4.2 billion in cash equivalents and available-for-sale securities. Remaining performance obligations totaled $2.732 billion, up 7% sequentially and 38% year over year.
The company reported non-GAAP net income of $107.8 million, or $0.29 per diluted share. Seifert said the quarter included $151 million in severance and other restructuring charges, including $99 million paid during the period. Cloudflare now expects up to $165 million of restructuring charges for the full year, with up to $130 million expected to be cash-related.
- Third-quarter revenue is expected to be $736 million to $737 million, representing 31% year-over-year growth.
- Third-quarter operating income is expected to be $129 million to $130 million.
- Full-year revenue is expected to be $2.864 billion to $2.870 billion, or 32% growth.
- Full-year operating income is expected to be $443 million to $445 million.
- Cloudflare expects full-year diluted non-GAAP earnings per share of $1.25 to $1.26.
Workers Adoption and AI Workloads
Prince said Cloudflare added nearly 2 million developers to its platform in the second quarter, bringing its total to more than 7.4 million. The quarterly developer addition exceeded the 1.5 million developers the company added during all of 2025, according to Prince.
The company said its Workers platform is becoming a more meaningful contributor to customer adoption and revenue. Prince said Workers is attracting developers building AI agents because of its lightweight architecture, rapid deployment capabilities and usage-based cost structure. He added that product-led adoption is growing alongside enterprise sales activity, with larger contracts increasingly incorporating the developer platform.
Seifert said Workers products remain Cloudflare’s fastest-growing product area, followed by its SASE and Zero Trust offerings. He also said the company’s revenue mix is evolving beyond a traditional ratable software-as-a-service model toward a mix that includes consumption arrangements, pool-of-funds contracts and “T-shirt sizing” structures.
Prince highlighted several customer contracts involving application services, Zero Trust, network security and Workers. These included a five-year, $31.8 million contract with a digital-native media company; a three-year, $11 million agreement with a European Global 2000 technology company; and a one-year, $7.5 million pool-of-funds deal with a generative AI company for the developer platform.
Agentic Internet Strategy
Prince said more than 50% of traffic across Cloudflare’s network was non-human for the first time during the second quarter. He said the company expects machine-to-machine traffic to continue expanding rapidly as AI agents increasingly access websites, APIs and other online resources.
Cloudflare said it is developing infrastructure and commercial tools intended to support what Prince called the “agentic Internet.” Since the beginning of the third quarter, the company has introduced Monetization Gateway, Wallets and cloudflare.pay. Prince said those offerings are designed to enable content owners and other businesses to charge for resources accessed by AI agents and to allow autonomous payment and identity verification between buyers and sellers.
Prince said Cloudflare’s approach differs from infrastructure providers focused on leasing commodity compute or GPU capacity. Rather than participating in what he described as an AI infrastructure “arms race,” he said Cloudflare is focused on delivering work efficiently across its global network and maximizing utilization of its capital investments.
“We’re in a very different business than the hyperscalers,” Prince said, arguing that Cloudflare’s model centers on selling completed work rather than renting servers.
Cloudflare also said it sees a growing opportunity in securing AI agents. Prince said large organizations are increasingly asking how to deploy AI securely, and he expects agent security to become an important consideration for customers evaluating Zero Trust and SASE platforms.
About Cloudflare (NYSE:NET)
Cloudflare, Inc is a global web infrastructure and security company that provides a suite of services designed to improve the performance, reliability and security of internet properties. Its core offerings include a content delivery network (CDN), distributed denial-of-service (DDoS) protection, managed DNS, and a web application firewall (WAF). Cloudflare also provides tools for bot management, SSL/TLS, load balancing and rate limiting to help organizations maintain uptime and protect web applications from attack.
In addition to traditional edge and security services, Cloudflare has expanded into edge computing and developer platforms.
