Cloudflare stock drops more than 15% after outlook forecasts possible loss

Cloudflare Inc. shares dropped in the extended session Thursday after the cybersecurity company’s quarterly results slightly beat Wall Street expectations, but its bottom-line forecast for the current quarter indicated a possible miss in its next report.

Cloudflare
NET,
-13.93%

shares fell more than 15% after hours, following a 14% drop in the regular session to close at $77.81. Thursday’s session wiped out the last of Cloudflare’s gains over the past 12 months as the stock’s price closed 1.5% lower than it was this time last year. In comparison, the S&P 500 index
SPX,
-3.56%

is down 1.3% over the past 12 months, and the tech-heavy Nasdaq Composite Index
COMP,
-4.99%

is off by 9.7%.

Cloudflare said it expects an adjusted loss of a penny a share to break-even on revenue of $226.5 million to $227.5 million for the second quarter, while analysts surveyed by FactSet had forecast break-even a share on revenue of $217.9 million.

For the year, the company didn’t change its previous guidance of adjusted earnings of 3 cents to 4 cents a share, while bumping up its revenue forecast to a range of $955 million to $959 million, from a previous range of $927 million to $931 million. Analysts estimate earnings of 3 cents a share on revenue of $931.1 million.

Meanwhile, Cloudflare reported a first-quarter loss of $41.4 million, or 13 cents a share, compared with a loss of $40 million, or 13 cents a share, in the year-ago period. The adjusted loss, which excludes stock-based compensation expenses and other items, was a penny a share, versus a loss of 3 cents a share in the year-ago period.

Revenue rose to $212.2 million from $138.1 million in the year-ago quarter.

Analysts had forecast break-even on a per-share basis share on revenue of $205.7 million, based on the company’s forecast of break-even to earnings of a penny a share on revenue of $205 million to $206 million.

“Cloudflare had a terrific first quarter of 2022, beating expectations with revenue growth up 54% year over year and adding more than 14,000 new paying customers — a quarterly record,” said Matthew Prince, Cloudflare’s chief executive, in a statement.

“Our largest customers continue to get larger, with those spending over $1M a year growing 72 percent year-over-year,” Prince said. “The key to our success and customer expansion is innovating at an unrelenting pace, and continued interest in consolidating behind a single vendor that can power multiple network services at scale.”

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