Shares in Cloudflare Inc. fell about 5% in late trading today after the content delivery network company reported earnings and revenue beats but missed on revenue guidance in its latest quarterly report.

For its third quarter that ended Sept. 30, Cloudflare reported adjusted net income of $55.3 million, or 16 cents per share, up from $19.1 million, or six cents per share, in the same quarter of last year. Revenue rose 32%, to $335.6 million. Analysts had expected net income of 10 cents per share on revenue of $330.6 million.

Cloudflare’s better-than-expected figures were driven by customer growth, with the company having 182,027 customers as of the end of September, up from 156,000 in the previous quarter and 100,968 in the same quarter of last year. The number of large customers — those with $100,000 or more in annualized revenue — grew to 2,558, up from 1,908 in the second quarter and 736 at the same time last year.

The company’s dollar-based net retention rate came in at 116% in the quarter, down from 124% in the same quarter of last year, but still a positive figure. Cloudflare is retaining more customer business than it is losing it.

Cloudflare’s cash balance as of the end of the quarter was $1.574 million, down from $1.636 billion in the same quarter of last year and its operating cash flow and margin were $68.1 million and 20%, up from $52.77 million and 17%.

Business highlights in the quarter include Cloudflare announcing an expansion to its artificial intelligence platform offerings for developers in late September. The announcement included the addition of infrastructure that allows the deployment of AI inference at large scale, vector databases and observability.

“In our third quarter, we relentlessly innovated and accelerated our efforts in AI, announcing the most complete platform to deploy fast, secure, compliant AI inference at scale with Workers AI — along with several partnerships and collaborations with the who’s who of AI,” Matthew Prince, co-founder and chief executive officer of Cloudflare, said in the company’s earnings release. “We believe inference is the biggest opportunity in AI and inference tasks will largely be run on end devices and on connectivity clouds like Cloudflare.”

For its fiscal fourth quarter of 2023, Cloudflare expects adjusted income per share of 12 cents on revenue of $352 million to $353 million. It was the latter outlook that sent Cloudflare stock down after hours, as analysts had been expecting revenue of $356.3 million.

Image: Cloudflare