Cloudflare (NET) to Report Q2 Earnings: What's in Store?

Cloudflare NET is slated to release second-quarter 2020 results on Aug 6.

Notably, the company completed its initial public offering (IPO) in September 2019. Ever since, it has reported three quarterly earnings. In the last reported quarter, the company’s bottom line beat the Zacks Consensus Estimate by 33.3%.

The company expects second-quarter revenues between $93.5 and $94.5 million. The Zacks Consensus Estimate for the top line is currently pegged at $94.3 million. Moreover, the consensus mark for loss has remained unrevised at 6 cents per share for the past 30 days.

Let’s see how things shaped up prior to this announcement.

Cloudflare, Inc. Price and Consensus

Cloudflare, Inc. price-consensus-chart | Cloudflare, Inc. Quote

Factors to Consider

Cloudflare’s diversified customer base is anticipated to have aided top-line growth during the second quarter. At the end of first-quarter 2020, the company had 2.8 million free and paying customers. Moreover, as of Mar 31, 2020, the company had roughly 89,000 paying customers across more than 160 countries.

Large customers (annual billings of more than $100,000) were 536 at the end of the March-end quarter. The company’s large customer base witnessed a CAGR of 80% during the 2016-2019 period. This momentum is likely to have continued in the to-be-reported quarter as well on elevated demand for its cloud-based solutions amid the pandemic-led remote working wave.

Further, the company’s recurring subscription-based business model provides relative stability to its top line despite the disruptions caused by the coronavirus outbreak.

Additionally, solid demand for security solutions, which became imperative due to aggravated cyberattacks, bring-your-own device policies and a zero-trust approach, is likely to have supported the top line in the quarter under review.

However, Cloudflare’s significant exposure to small and medium businesses (SMBs), the worst-hit cohort by the pandemic, is expected to have impeded growth in the quarter to be reported.

What Our Model Says

Our proven model predicts an earnings beat for Cloudflare this season. The combination of a positive Earnings ESP, and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Cloudflare currently carries a Zacks Rank of 3 and has an Earnings ESP of +6.38%.

Other Stocks With Favorable Combinations

Here are some other companies, which, per our model, have the right combination of elements to post an earnings beat this quarter:

Cogent Communications Holdings CCOI has an Earnings ESP of +11.66% and carries a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Synaptics SYNA has an Earnings ESP of +10.6 % and currently carries a Zacks Rank of 2.

Benefitfocus BNFT has an Earnings ESP of +6.25% and carries a Zacks Rank of 2, currently.

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