Cloudflare Q2 Report: Gross Margin Turned Up for the First Time in Two Years.

Key Takeaways for Cloudflare Stock as of August 2026

• Revenue Reacceleration: Cloudflare posted Q2 revenue of $696.1M, up 36% YoY, with adjusted EPS of $0.29 and operating income of $96.1M.
• Margin Turn: Gross margin ticked up 30bps sequentially to 73.1%, its first sequential gain in eight quarters.
• Full-Year Guide: Management guided FY2026 revenue to $2.864B–$2.870B, up ~32% YoY, with full-year operating income of $443M–$445M and EPS of $1.25–$1.26.
• Agentic Traffic Crossover: More than 50% of network traffic went nonhuman in Q2 for the first time, and the Workers developer platform hit 7.4M developers after nearly 2M net adds in the quarter.
• CEO’s Thesis: Matthew Prince argued the internet’s business model will be “very different” over the next 27 years, positioning Cloudflare to monetize agent traffic through new payment rails like cloudflare.pay.

Nonhuman traffic just passed human traffic on Cloudflare’s network, and gross margins turned up for the first time in two years. See how the full financials stack up on TIKR for free →

Nonhuman Traffic Crossed 50% as Cloudflare’s Q2 Growth Reaccelerated to 36%

Cloudflare (NET) reported second-quarter 2026 revenue of $696.1 million on August 6, up 36% year over year and an acceleration from the pace it held through 2025. Adjusted earnings landed at $0.29 per share. Operating income reached $96.1 million, a 13.8% operating margin.

The number management kept returning to wasn’t on the income statement. For the first time, more than half the traffic crossing Cloudflare’s network in the quarter came from machines rather than people. CEO Matthew Prince framed the shift on the Q2 earnings call: “For the first time in human history, in Q2, more than 50% of the traffic flowing across Cloudflare’s network was not human.” That crossover is the demand signal sitting under the developer surge: the Workers platform, Cloudflare’s serverless environment for building and running code, ended the quarter with 7.4 million developers after adding nearly 2 million in Q2 alone, more than the company added in all of 2025.

Growth showed up in the customer base too. Cloudflare added a record 986 large customers (those paying more than $100,000 a year) over the trailing twelve months, lifting the total to 4,698, up 27%. Dollar-based net retention, a measure of how much existing customers grow their spend, climbed to 120%, up two points sequentially. More than 80,000 paying customers joined in the quarter, pushing paying-customer growth to 74% year over year.

Then the margin turn. Gross margin rose 30 basis points sequentially to 73.1%, its first sequential improvement in eight quarters, as the long drag from allocating network costs to paid AI traffic began to stabilize. Free cash flow of $56.4 million grew 69% year over year and covered 8% of revenue.

The quarter wasn’t spotless: on a GAAP basis Cloudflare lost $0.48 per share, weighed down by $151 million of severance and restructuring charges booked in Q2, with full-year charges now expected to reach as much as $165 million.

Management raised the bar anyway. For full-year 2026, Cloudflare guided revenue to $2.864 billion to $2.870 billion, up 32%, with operating income of $443 million to $445 million and earnings of $1.25 to $1.26 per share. Third-quarter revenue guidance of $736 million to $737 million points to 31% growth. Cloudflare stock now trades against a business compounding north of 30% with margins finally inflecting.

Cloudflare guided full-year revenue to $2.87 billion and earnings of $1.26 per share at the high end. Track every quarter of estimates and revisions on TIKR for free →

TIKR Values Cloudflare Stock at $729, Betting on the Agentic Traffic Wave

TIKR’s mid-case model values Cloudflare at $729 by December 2030, a 156% total return from the current price of $284, or 24% annualized over the next 4.4 years.

A 24% annualized return over four-plus years prices Cloudflare stock as a premium compounder, not a name the market expects to derate as growth normalizes.

The reacceleration to 36% revenue growth and the first sequential gross-margin gain in eight quarters give the model the top-line durability and margin path its $729 target leans on, with the raised full-year guide confirming both. That target assumes Cloudflare keeps converting the agentic traffic surge into paying developers and expanding large-customer spend at the rate the quarter showed.

TIKR’s model puts Cloudflare stock at $729 by 2030, a 156% total return from here. Build your own valuation on TIKR for free →

Should You Invest in Cloudflare, Inc.?

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Pull up Cloudflare, Inc. stock and you’ll see years of historical financials, what Wall Street analysts expect for revenue and earnings in the quarters ahead, how valuation multiples have moved over time, and whether price targets are trending up or down.

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Disclaimer:

Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!