Cloudflare Stock Surges on Strong Earnings, Upbeat Outlook—Key Price Level to Watch

Cloudflare, Inc.

Shares in Cloudflare (NET) surged nearly 25% in premarket trading Friday after the cybersecurity and content delivery solutions provider delivered a better-than-expected quarterly report and issued first-quarter guidance above Street estimates, fueled by the addition of large customers and growing demand for cloud security services.

For the December quarter, the San Francisco-based company posted adjusted earnings of 15 cents per share on revenue of $362.5 million, whereas analysts had expected earnings per share (EPS) of 12 cents on sales of $353.1 million. Moreover, the top-line grew 32% from the prior year.

Cloudflare co-founder and CEO Matthew Prince credited the strong quarter to the signing of large customers, expansion into the government sector, and growth in the company’s cloud-based network-as-a-service (NaaS) solution, Cloudflare One.

“To close out the year, strength in our business was driven by robust momentum with large customers, significant progress in the public sector, and growth in Cloudflare One,” Price said in the earnings statement. He added that the company inked its largest new customer deal and biggest renewal during the quarter, helping to drive record annual contract value.

Looking ahead, Cloudflare projects to earn an adjusted profit of 13 cents per share in the current quarter, a penny above the analysts’ modeling of 12 cents a share. Importantly, the lower end of the company’s top-line guidance range between $372.5 million and $373.5 million comes in above Wall Street’s first-quarter revenue estimate of $372.3 million.

The cloud solutions company said it remains focused on supplying software developers with graphics processing units (GPUs) used for artificial intelligence (AI), saying that it plans to install GPUs across most of its network this year. The company also said it aims to grow its security services business, targeting enterprise customers and government agencies amid increased cybersecurity attacks since the Middle East conflict broke out in October last year.

NET shares broke above an ascending triangle pattern on higher-than-average volume leading into earnings, indicating investors expected a blowout quarterly report, which the company delivered. If an earnings-driven rally extends beyond this week, keep an eye on the $132 level as a potential area of chart resistance. This region may see investors lock in profits near the prominent March 2022 swing high.

Cloudflare shares were up 24.9% at $112.80 about an hour before the opening bell.

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As of the date this article was written, the author does not own any of the above securities.