Cloudflare has raised its full-year revenue forecast after reporting second-quarter revenue of $696.1 million, up 36% year over year, as demand linked to AI-driven Internet traffic helped fuel growth. The connectivity cloud company now expects full-year revenue of between $2.864 billion and $2.870 billion, above its previous forecast of $2.805 billion to $2.813 billion.
The results sent Cloudflare's stock up 16.2% to $330.51 ahead of Friday's open. The company also raised its full-year adjusted EPS outlook to between $1.25 and $1.26, compared with its previous guidance of $1.19 to $1.20, while current remaining performance obligations increased 35% year over year.
Cloudflare's results underline the growing commercial impact of AI on its business, with the web infrastructure company pointing to increasing demand as the Internet shifts toward AI answer engines, agent-driven commerce and machine-to-machine traffic.
Cloudflare's AI Business Continues to Accelerate
Cloudflare's non-GAAP income from operations rose to $96.1 million, or 13.8% of revenue, compared with $72.3 million, or 14.1% of revenue, a year earlier. Free cash flow reached $56.4 million, equal to 8% of revenue.
The company attributed the stronger outlook to continued demand across its platform as businesses adapt to an Internet increasingly shaped by AI. CEO and co-founder Matthew Prince said AI answer engines and agent-driven commerce are creating a fundamental shift toward machine-to-machine traffic.
For the third quarter, Cloudflare expects revenue of between $736 million and $737 million, alongside non-GAAP income from operations of between $129 million and $130 million.
The company also highlighted record growth in total paying customers, large customers and developers using its platform.
Cloudflare's Workers developer platform remains its fastest-growing area, according to Morgan Stanley analysts. The business is increasingly moving toward a consumption-based model, potentially allowing Cloudflare to capture more revenue as developers and AI applications generate greater demand for its infrastructure.
Cloudflare Is Building for a More Automated Internet
The results take on a different significance when viewed alongside changes Cloudflare has been making internally. The company announced plans to eliminate around 1,100 positions, or approximately 20% of its global workforce, alongside its first-quarter earnings.
At the time, Prince and co-founder Michelle Zatlyn described the move as a realignment around AI-driven operations rather than conventional cost cutting. Cloudflare also said employee adoption of AI tools had increased by more than 600% during the first quarter.
