Shares in Cloudflare Inc. were up more than 18% in late trading today after the content delivery network and security company beat second-quarter estimates and raised its full-year forecast.

For the quarter that ended on June 30, Cloudflare reported adjusted earnings per share of 29 cents, up from 21 cents in the same quarter of 2025, on revenue of $696.1 million, up 36% year-over-year. Analysts had been expecting 27 cents per share and revenue of $664.8 million.

Sitting underneath the beat was a large one-time cost. Cloudflare booked $150.7 million in restructuring and other charges in the quarter, tied to the 1,100 job cuts it announced in May. That is slightly above the $140 million to $150 million it had estimated for the whole plan. The charge widened the company’s unadjusted net loss to $170 million, or 48 cents a share, from $50.4 million, or 15 cents, a year earlier. Adjusted net income, which strips out the restructuring and stock-based compensation, came in at $107.8 million.

Adjusted income from operations was $96.1 million, or 13.8% of revenue, a slightly thinner margin than the 14.1% Cloudflare managed a year ago. Free cash flow reached $56.4 million, up from $33.3 million. The company closed the quarter with $4.16 billion in cash, cash equivalents and available-for-sale securities.

Large customers, those generating more than $100,000 in annualized revenue, numbered 4,698 at the end of June, up 27% year-over-year. That cohort now produces 73% of revenue. Dollar-based net retention climbed to 120%, from 114% a year earlier and 118% in the March quarter. Current remaining performance obligations, a measure of contracted revenue due within a year, grew 35%. Cloudflare no longer breaks out a total paying customer count, though co-founder and Chief Executive Matthew Prince said the quarter brought record growth in that number.

“We delivered a stellar second quarter, highlighted by revenue accelerating to $696.1 million, up 36% year-over-year,” Prince said in the company’s earnings release. He argued that the shift to AI answer engines and agent-driven commerce amounts to “a fundamental rewrite of the Internet for machine-to-machine traffic,” with Cloudflare building the infrastructure, controls, developer tools and payment rails for it.

Guidance is where the quarter did the most work. For the third quarter, Cloudflare put revenue at $736 million to $737 million. Analysts had been closer to $721 million. Adjusted earnings should land at 34 cents a share, the company said. The full-year number moved too. Cloudflare now sees revenue of $2.86 billion to $2.87 billion, up from the $2.81 billion it guided to in May, and adjusted earnings of $1.25 to $1.26 a share.

That is a sharp reversal from May. Cloudflare shares fell more than 16% after the first quarter. The earnings beat that quarter got buried under light guidance and word that 20% of staff would go. Prince called the cuts a re-architecture of the company around what it calls an agentic AI-first operating model. Investors were not convinced. The cuts are landing. Cloudflare counted 4,700 employees at the end of June, down from 5,483 three months earlier. The remainder is due by the end of the third quarter.

Product activity in the quarter leaned heavily on the same theme. Cloudflare expanded its Agent Cloud offering in April with tools for moving agents into production workloads, and it launched Mesh, a global private networking service built to deploy and govern those agents. A “your content, your rules” framework followed, giving site owners control over how AI models use their material, with GoDaddy Inc. signed up to help push the standards. Newsletter platform beehiiv Inc. switched on Cloudflare’s AI Crawl Control for its writers in June.

The company bought VoidZero Inc., the open-source outfit behind the Vite JavaScript toolchain, in June. Partnerships announced during the quarter included one with Anthropic PBC to pair Claude models with Cloudflare’s network and Workers platform and another with Google LLC’s Wiz unit covering shadow AI exposure.

Adjusted operating margin has now narrowed year-over-year for two straight quarters, to 13.8% from 14.1% in the second quarter and to 11.4% from 11.7% in the first, even as revenue growth accelerated. The full-year guidance points the other way. It implies an adjusted operating margin of about 15.5%, against 14% in 2025.

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