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Cloudflare (NYSE:NET) just scored the biggest contract in its history a $100 million deal driven by its Workers developer platform. The 27% revenue surge to $479.1 million in Q1 highlights strong enterprise demand, but the numbers tell a more complicated story. Adjusted EPS held steady at $0.16, while net income stayed in the red and EBITDA barely moved, underscoring the ongoing struggle to turn growth into profit.
Despite the revenue boost, Cloudflare's margins dipped to 77%, raising questions about whether it can balance aggressive expansion with cost control. The number of large customers spending over $100,000 annually jumped 23% to 3,527, accounting for 69% of total revenue. Yet, as the chart shows, despite the consistent increase in revenue over time, profitability remains an issue minimal EBITDA and consistently negative net income signal that growth is coming at a steep cost.
Looking forward, Cloudflare projects 25% revenue growth in fiscal 2025, targeting $2.09 billion to $2.094 billion in sales with a 13% non-GAAP operating margin. But with shares still 30% off their 52-week high, investors may need to decide whether the revenue gains are worth the persistent profitability squeeze.
This article first appeared on GuruFocus.