Cloudflare Valuation Already Priced for Next Growth Chapter
Cloudflare's second quarter results showed revenue growth of 36% year over year to $696.1 million, beating analyst estimates and sending its stock price to new highs.
The company added a record 986 large customers over the trailing year and net dollar retention accelerated to 120%, up six points from a year earlier.
However, despite the strong growth, Cloudflare's valuation is already near its historical ceiling, with an NTM EV/Revenue multiple of 35.17x, just below its all-time high of 36.30x and well above its roughly two-year average of 22.30x.
CFO Thomas Seifert told investors at the Goldman Sachs conference that Workers is still the fastest-growing act Cloudflare has, followed by SASE, with Act 4 monetization explicitly still ahead.
The company's free cash flow margin, which management points to as evidence of a credible path to GAAP profitability by 2028, has fallen for two straight quarters, from 14.55% in Q1 2026 to 9.71% in Q2 2026, even as severance and restructuring costs climbed toward $165 million for the year.
President Michelle Zatlyn, CFO Thomas Seifert, and director John Graham-Cumming all sold stock in August and September, with Zatlyn alone disposing of roughly $44 million across two separate filings.