What drives the impressive developer traction for Workers, especially with open-source models, and how does Cloudflare OS expand opportunities beyond developers?

Matthew Prince attributed Workers' success to its suitability for agentic workloads (lightweight, secure, cost-effective). He noted the open-sourcing of Cloudflare OS, which leverages the company's security DNA to enable secure AI tool adoption across all organizational employees, not just developers, by integrating securely with systems of record. “I think the thing that's unique about us is that because we started out as a security company... we understand how to do these things securely, and that's allowing us to move fast without breaking things.”

At what point will there be a security opportunity around securing and orchestrating agents, and what will that security portfolio look like?

Matthew Prince stated that the security opportunity for agents is already present, with large companies seeking Cloudflare's SASE/Zero Trust solutions due to their agents-first approach. He cited an example of a government agency re-evaluating vendors after realizing their incumbent hadn't considered agent security, highlighting Cloudflare's advantage from its developer platform origins. “I think that if you listen to a lot of the Zero Trust vendors that are out there, they're talking about human seats and things like that. I think we've sort of short-cutted a lot of those conversations by saying, like, 'Do whatever you want with the humans in your org, but you're going to have even more agents and you've got to have a proper security model for those agents.'”

Given the accelerating trends, is there a scenario where Cloudflare's structural growth rate could be higher over the next three years?

Thomas Seifert affirmed that multiple factors, including innovation, an expanding TAM (from $30B at IPO to >$300B), accelerating flywheels across product 'Acts,' and faster growth in larger customer cohorts, point to continued momentum. Matthew Prince expressed a desire to return to even higher growth rates, reminiscing about earlier periods. “I remember when our growth rates were a lot higher and I miss those days. And so we'll not -- won't be upset if we get back to even higher growth rates.”

NET

Cloudflare (NET) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Aug 6, 2026

Source: earnings call transcript

Executive summary

Cloudflare Q2 FY26 — Stellar Growth Driven by Agentic AI and Developer Platform

Cloudflare delivered a stellar quarter, driven by strong momentum in its Workers developer platform and agentic AI workloads, leading to significant customer expansion and accelerated growth. The company is strategically positioned at the center of the Internet's paradigm shift towards machine-to-machine traffic, focusing on building foundational infrastructure for agentic commerce. Despite restructuring costs, Cloudflare is ahead of its GAAP profitability target and continues to prioritize disciplined execution and innovation.

Highlights

Revenue reached $696.1 million, marking a 36% year-over-year increase.
Dollar-based net retention accelerated to 120%, up 6% year-over-year.
Added a record 986 large customers ($100K+ ARR) year-over-year, a 27% increase.
Non-GAAP operating profit was $96.1 million, representing a 13.8% operating margin.
Free cash flow grew 69% year-over-year to $56.4 million.

Concerns

Severance and other restructuring charges amounted to $151 million in Q2, with $99 million paid.
Full-year 2026 severance and restructuring charges are now expected up to $165 million, with up to $130 million cash-related.
General and administrative expenses as a percentage of revenue increased to 11% from 10% year-over-year.

Guidance & targets

Category	Target	Timeline	Confidence
Revenue	$736 million to $737 million high materiality	Q3 · FY26	High
Operating Income	$129 million to $130 million medium materiality	Q3 · FY26	High
Effective Tax Rate	20% low materiality	Q3 · FY26	High
Diluted Net Income per Share	$0.34 high materiality	Q3 · FY26	High
Revenue	$2.864 billion to $2.870 billion high materiality	FY26	High
Operating Income	$443 million to $445 million medium materiality	FY26	High
Effective Tax Rate	20% low materiality	FY26	High
Diluted Net Income per Share	$1.25 to $1.26 high materiality	FY26	High
Network CapEx as % of Revenue	14% to 15% medium materiality	FY26	High
Severance and other restructuring charges	up to $165 million medium materiality	FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
United States The U.S. segment represented 51% of total revenue and showed strong year-over-year growth. Revenue contribution: 51%	$355.0 million	41%	—	—
EMEA EMEA contributed 27% of total revenue with solid year-over-year growth. Revenue contribution: 27%	$188.0 million	30%	—	—
APAC APAC represented 14% of total revenue and experienced 32% year-over-year growth. Revenue contribution: 14%	$97.4 million	32%	—	—

NET operating KPIs by quarter

NET operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Dec 2024 Q4 FY24	Jun 2025 Q2 FY25	Sep 2025 Q3 FY25	Dec 2025 Q4 FY25	Mar 2026 Q1 FY26	This call Jun 2026 Q2 FY26	Change vs prior quarter
Customers above an annual spend threshold Paying >$100,000 per year	3,497 During the quarter, we added a record number of new large customers those that pay us more than $100,000 per year, and now have 3,497 large customers, also up 27% year-over-year. Source: earnings call transcript	3,712 We now have 3,712 customers paying us more than $100,000 per year, a 22% increase year-over-year. Source: earnings call transcript	4,009 We now have 4,009 large customers, those that pay us more than $100,000 per year, a 23% increase year-over-year. Source: earnings call transcript	4,298 We now have 4,298 customers paying us more than $100,000 per year, up 23% year-over-year. Source: earnings call transcript	4,416 We now have 4,416 customers paying us more than $100,000 per year, a 25% increase year-over-year. Source: earnings call transcript	4,698 We now have 4,698 customers paying us more than $100,000 per year, a 27% increase year-over-year. Source: earnings call transcript	+6.4%
Net revenue retention rate	111% Our dollar-based net retention ticked up 1 percentage point quarter-over-quarter to 111%. Source: earnings call transcript	114% Our dollar-based net retention was 114%, up 3% quarter-over-quarter. Source: earnings call transcript	119% Our dollar-based net retention was 119%, up 5 percentage points quarter-over-quarter. Source: earnings call transcript	120% Our dollar-based net retention was 120%, up 1% quarter-over-quarter and 9% year-over-year. Source: earnings call transcript	118% Our dollar-based net retention was 118%, down 2% quarter-over-quarter and up 7% year-over-year. Source: earnings call transcript	120% Our dollar-based net retention was 120%, up 2% quarter-over-quarter and up 6% year-over-year. Source: earnings call transcript	+2 pt
Customers	~237.7K In the fourth quarter, we had approximately 237,700 paying customers, representing a record addition of nearly 48,000 paying customers in 2024 and an increase of 25% year-over-year. Source: earnings call transcript	~266K In the second quarter, we had approximately 266,000 paying customers, representing an addition of over 15,000 paying customers sequentially and an increase of 27% year-over-year. Source: earnings call transcript	~296K In the third quarter, we had approximately 296,000 paying customers, representing a record net addition of nearly 30,000 paying customers sequentially and an increase of 33% year-over-year, driven by an uptick in customers, including those graduating from the free tier to small paid accounts for developer platform products around our AI Week and birthday week. Source: earnings call transcript	~332K In the fourth quarter, we had approximately 332,000 paying customers, representing a record addition of nearly 37,000 paying customers sequentially and an increase of 40% year-over-year, driven again by an uptick in customers, including those graduating from the free tier to small paid accounts, particularly for our developer platform products. Source: earnings call transcript	—	—	—
Employees	~4,300 Our total number of employees increased 16% year-over-year, bringing our total headcount to about 4,300 at the end of the quarter. Source: earnings call transcript	4,600+ Our total number of employees increased 18% year-over-year, bringing our total headcount to more than 4,600 at the end of the quarter. Source: earnings call transcript	~4,800 Our total number of employees increased 16% year-over-year, bringing our total headcount to roughly 4,800 at the end of the quarter. Source: earnings call transcript	~5,200 Our total number of employees increased 21% year-over-year, bringing our total headcount to approximately 5,200 at the end of the quarter. Source: earnings call transcript	~5,500 Our total headcount ended the quarter at approximately 5,500. Source: earnings call transcript	4,700 Our total head count ended the quarter at 4,700. Source: earnings call transcript	—
Remaining performance obligation (RPO)	$1.687B Remaining performance obligations, or RPO, came in at $1.687 billion, representing an increase of 12% sequentially and 36% year-over-year. Source: earnings call transcript	$1.977B Remaining performance obligations, or RPO, came in at $1.977 billion, representing an increase of 6% sequentially and 39% year-over-year. Source: earnings call transcript	$2.143B Remaining performance obligations, or RPO, came in at $2.143 billion, representing an increase of 8% sequentially and 43% year-over-year. Source: earnings call transcript	$2.496B Remaining performance obligations, or RPO, came in at $2.496 billion, representing an increase of 16% sequentially and 48% year-over-year. Source: earnings call transcript	$2.543B Remaining performance obligations, or RPO, came in at $2.543 billion, representing an increase of 2% sequentially and 36% year-over-year. Source: earnings call transcript	$2.732B Remaining performance obligations, or RPO, came in at $2.732 billion, representing an increase of 7% sequentially and 38% year-over-year. Source: earnings call transcript	+7.4%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Remaining Performance Obligations (RPO) $2.732 billion Q2 FY26

7% sequentially and 38% year-over-year

Current RPO 64% of total RPO Q2 FY26

35% year-over-year

Product announcements

Product	Type	Timeline
Monetization Gateway	launch	Q3 FY26
Wallets	launch	Q3 FY26
cloudflare.pay	launch	Q3 FY26
Cloudflare OS	launch	Q3 FY26

Deals & partnerships

Leading digital native media company Expanded relationship for Application Services and Zero Trust to combat scraping and accelerate global performance. $31.8 million 5-year

Customer chose Cloudflare for best-in-breed edge capabilities and operational velocity despite competitive pressure from incumbent hyperscaler.

Global 2000 European technology company Expanded relationship for Application Services and Zero Trust, with developer platform seeded for future AI workloads. $11 million 3-year

Customer chose Cloudflare to eliminate 5 incumbent legacy point solutions and consolidate their IT footprint onto a single unified platform.

Large U.S. federal agency Expanded relationship for Magic Transit and Network Firewall to enhance resilience and control after a major outage. $7.7 million 5-year

Cloudflare reduced rule change time from 1 week to 30 seconds, cut hardware costs, and enabled the agency to run network and application security on one platform.

Rapidly growing generative AI company Signed a pool of funds contract for the developer platform to handle enormous volumes of images and video. $7.5 million 1-year

Customer chose Cloudflare to avoid hyperscaler egress taxes and vendor lock-in, leveraging its zero egress model, reliability, and scale.

Rapidly growing technology company in APAC Expanded relationship with a pool of funds contract for the Workers developer platform. $4 million 1-year

This deal builds on an $8.7 million Application Services contract from last quarter. Customer standardized on Cloudflare end-to-end, directing every request through a Cloudflare Worker.

Fortune 100 technology company Expanded relationship for the full SASE portfolio, replacing legacy VPNs and virtual desktops. $5.2 million 3-year

Cloudflare won due to faster network performance and single pane of glass management, expecting to run services with 1/3 the staff.

Fortune 1000 technology company Expanded relationship for Application Services and Workers developer platform. $15.9 million 18-month

Customer standardized on Cloudflare to eliminate multiproduct complexity and secure long-term operational predictability for an AI-first customer platform.

Leading technology company Signed a pool of funds contract for the Workers developer platform to scale new AI agent capabilities. $6 million 1-year

Customer chose Cloudflare over legacy hyperscalers for elastic, secure container infrastructure, built-in threat intelligence, rapid innovation, and FedRAMP compliance.

OpenAI First-of-its-kind research pilot to pave the way for a sustainable ecosystem of content creators and AI companies.

Aims to foster collaboration and fair compensation between AI companies and content creators.

Risks & headwinds

Severance and restructuring charges Q2 FY26 and Full Year FY26

$151 million in Q2 FY26, with $99 million paid; full year expected up to $165 million (up to $130 million cash-related)

Mitigation:Prioritized speed of resolution, particularly internationally, to ensure a continued focus on execution.

Network cost allocation impact on gross margin Q2 FY26

320 basis points decrease YoY in gross margin

Mitigation:Trend of paid versus free traffic growth driving network costs into COGS is showing signs of beginning to stabilize; focus on total unit economics expansion.

Increased G&A as percentage of revenue Q2 FY26

Increased to 11% from 10% YoY

Mitigation:Not explicitly stated, but overall operating leverage is improving, and the company is ahead of its GAAP profitability targets.

What to watch in Q3 FY26

Non-human traffic growth

Next quarter and beyond

Current >50% of network traffic

Target Continued acceleration towards 1000x human traffic in 5 years

Why it matters

This fundamental shift in internet usage is driving new monetization opportunities and redefining the company's strategic focus.

if the current trends continue, we think in 5 years, nonhuman traffic will be as much as 1,000x as much as human traffic.

Find out whether NET delivers this. Inve re-checks your case every morning.

Q&A highlights

How will the increasing non-human traffic be monetized, and will it drive new logos or expansion with existing large/small customers?

Matthew Prince highlighted that non-human traffic now exceeds human traffic and is projected to be 1,000x human traffic in 5 years. Cloudflare is building new monetization models like cloudflare.pay for microtransactions to charge agents, aiming to define the next 27 years of the Internet's business model. This will benefit both large and small customers.

“I think the business model of the Internet for the last 27 years has been largely defined by advertising and really defined by Google. I think the business model of the next 27 years of the Internet is going to be very different, and there's no company in a better position to define what it looks like than Cloudflare.”

asked by Saket Kalia · answered by Matthew Prince

2 min read 6 chapters

Detailed narrative

Agentic AI and Internet Transformation

Cloudflare is at the forefront of a fundamental shift in Internet traffic, with over 50% of its network traffic now originating from non-human sources, a milestone reached earlier than anticipated. This trend is projected to accelerate dramatically, potentially leading to non-human traffic being 1,000 times greater than human traffic within five years.

The company is strategically positioning itself to power this 'agentic Internet' by building scalable infrastructure, developer tools, and new payment rails for machine-to-machine interactions.

Developer Platform Momentum and Cloudflare OS

The Workers developer platform is experiencing unprecedented growth, attracting nearly 2 million new developers in Q2 alone, surpassing the total additions for all of 2025. This surge is attributed to Workers' suitability for agentic workloads, offering a lightweight, cost-effective, and secure environment.

Cloudflare further bolstered its developer ecosystem by open-sourcing Cloudflare OS, an internal tool that has significantly enhanced team efficiency, aiming to enable other organizations to securely integrate AI tools leveraging Cloudflare's inherent security capabilities.

New Business Models for Agentic Commerce

In response to the evolving Internet landscape, Cloudflare unveiled key components for a two-sided agentic marketplace, including Monetization Gateway, Wallets, and cloudflare.pay. These innovations are designed to facilitate microtransactions for machine-to-machine traffic, enabling new business models for content creators and AI companies.

The company aims to support an immense volume of transactions, far exceeding current payment network capacities, to ensure a sustainable economic model for the future Internet.

Enterprise and Partner Ecosystem Expansion

Cloudflare continues to demonstrate strong momentum in its enterprise segment, evidenced by record additions of large customers and increasing contract values, including several multi-million dollar deals. The company's partner ecosystem is also expanding, particularly in the SASE and Zero Trust domains, with partner-driven revenue expected to continue growing.

Cloudflare is investing in making its sales team more technical and enabling partners to leverage its developer platform and Cloudflare OS for broader implementations.

Gross Margin Stabilization and Unit Economics Focus

Gross margin stabilized at 73.1% in Q2, marking the first sequential improvement in eight quarters. While the growth of paid versus free traffic continues to reallocate network costs into the cost of revenue, management emphasizes focusing on total unit economics across all products.

The company expects these unit economics to continue expanding through the second half of the year, reflecting overall business efficiency and profitability improvements.

Disciplined AI Infrastructure Strategy

Cloudflare maintains a disciplined approach to AI infrastructure, opting not to participate in the 'AI CapEx arms race' of selling commodity compute. Instead, the company focuses on maximizing utilization of its existing CapEx dollars and leveraging its proprietary sandboxing technology ('isolates') to provide highly efficient, scalable, and cost-effective solutions for agentic workloads.

This strategy differentiates Cloudflare from hyperscalers by focusing on delivering 'work getting done' rather than merely renting servers.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.