Cloudflare announced better-than-expected earnings for the first quarter but its revenue for the same period was in line with expectations. However, the company's stock experienced a sharp decline due to a below-average revenue outlook for the June quarter.
Cloudflare released its earnings report after the close of the market, revealing a profit of 8 cents per share, a significant increase from the 1 cent profit reported during the same period last year. The San Francisco-based company also reported a 37% increase in revenue, reaching $290.2 million. Analysts had forecasted a profit of 3 cents per share for the March quarter along with revenue growth of 37% to $290.8 million.
In Thursday’s (27th April) stock market, during after-hours trading, Cloudflare's stock dropped by 22% to reach 46.50.
Cloudflare's revenue guidance exceeded expectations in regards to its stock.
Cloudflare estimated that its revenue for the June quarter would be around $305.5 million while analysts had predicted it to be $319.8 million.
There are analysts who anticipate potential benefits in 2023 for Cloudflare due to its association with OpenAI, an artificial intelligence startup. Cloudflare offers secure connections to cloud services for users who enrol in OpenAI's ChatGPT, a chatbot for natural language conversations.
Moreover, shareholders have expressed apprehension about the possibility of Cloudflare losing revenue from cryptocurrency clients in 2023. Furthermore, based on IBD Stock Checkup, Cloudflare's stock has a Relative strength Rating of 88 out of a possible 99.
“Management noted increasing macroeconomic uncertainty over the quarter that resulted in lengthening sales cycles and a back-end weighted quarter, Guidance assumes a continuation of these trends with revenue growth moving lower for Q2 and 2023 against increased profitability” said RBC Capital Markets analyst Matthew Hedberg said in a note to clients.
