Cloudflare Q2 2022 Earnings Send Stocks Soar

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

Noam Galai | Getty Images Entertainment | fake images

Cloudflare shares rose as much as 27% on Friday, after the content delivery network and security provider announced second-quarter results and full-year guidance that beat analyst predictions.

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

The company said it added a record number of customers paying more than $100,000 per year, and management increased its forecast for 2022, with growth of around 48%.

“In the first quarter, our project generation slowed, sales cycles extended, and customers took longer to pay their bills,” Cloudflare CEO Matthew Prince told analysts on the earnings call. “We watched those metrics closely during the second quarter and saw them at least flatten out. They’re not where we’ve thrown a parade yet, but the metrics are trending in the right direction.”

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

Cloudflare is one of several cloud software companies showing increased appeal to investors, who left the sector during the first half of the year. Along with Cloudflare, Paylocity and ZoomInfo are also up more than 25% so far in August.

Analysts surveyed by FactSet now have an average price target of around $92 per share. That’s well below Cloudflare’s record of $217.25 from November, but above the current price of around $73.

Not all analysts are so optimistic. Citigroup analysts maintained their hold rating, saying the stock is “much more demanding at valuation levels relative to our profitable hyper-growth names” such as CrowdStrike, Atlassian and Datadog.

Despite rising revenue, Cloudflare’s net loss soared to nearly $64 million from $35 million in the prior year quarter. Prince said the company changed its “marketing message” during the recession and is focused on helping customers save money and consolidate “spend from multiple point solution providers behind Cloudflare’s broad platform.”

CLOCK: Cybersecurity is recession-resistant, says Truist’s Joel Fishbein

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