Beneath the top-line strength, margins showed pressure. Non-GAAP gross margin fell 3.2 percentage points year over year to 73.1%, and non-GAAP operating margin slipped 0.3 point to 13.8%. A restructuring plan announced in the quarter includes a 20% workforce reduction and up to $165 million in total charges, with $150.7 million already recorded in Q2.
The broader market opened higher on the same day. The Nasdaq Composite rose 1% to 26,553.45, leading the S&P 500 (+0.34%) and Dow Jones (+0.13%) as investors digested a July jobs report that added roughly 80,000 payrolls — a modest rebound from June's 57,000 — with the unemployment rate holding at 4.2%. The data eased fears of an aggressive Fed rate hike, sending the 10-year Treasury yield down to 4.63%.
Cloudflare's valuation now implies a 40.7-times forward sales multiple. The question is whether the AI-driven traffic inflection can sustain a growth trajectory that justifies a premium that leaves little room for execution slip.
Sources: Source 1 · Source 2 · Source 3 · Source 4 · Source 5 · Source 6
