Shares in content delivery network company Cloudflare Inc. plunged in late trading even though it beat all expected metrics in its latest earnings report as investors were reportedly spooked by figures suggesting moderating growth.

For its third quarter that ended Sept. 30, Cloudflare reported a profit before costs such as stock compensation of $19.1 million, or six cents per share, up from $1.4 million or breakeven in the same quarter of 2021. Revenue in the quarter jumped 47%, to $253.9 million. Analysts had expected breakeven earnings per share on revenue of $250.63 million.

Adjusted gross profit was $198.4 million or 78.1% gross margin, up from $136.6 million or 79.2% in the same quarter last year. Cash flow from operating activity totaled $42.7 million, up from negative $6.9 million. Fresh cash flow was negative $4.6 million, or 2% of total revenue. Cash, cash equivalents and available-for-sale securities sat at $1.636 billion at the end of September.

Other highlights include large customers, those with more than $100,000 in annualized revenue, hitting 1,908 — up from 1,260 a year ago and 736 in 2020’s third quarter. Total customers surpassed 156,000, with 47% of Cloudflare’s revenue coming from outside the U.S. Over the quarter, Cloudflare also blocked 126 billion cyberthreats per day on average.

“We achieved an important milestone in the third quarter, surpassing $1 billion in annualized revenue for the first time,” Matthew Prince, co-founder and chief executive officer of Cloudflare, said in a statement. “The opportunity we have in front of us is enormous. Even with this achievement, we’ve penetrated less than 1% of our identified market for the products we have available today.”

For its fiscal fourth quarter of 2022, Cloudflare predicts an adjusted profit of four to five cents a share on revenue of $273.5 million to $274.5 million. Analysts had predicted an adjusted profit of a penny on revenue of $273.6 million.

For the full fiscal year 2022, Cloudflare expects an adjusted profit of 11 to 12 cents a share on revenue of $974 million to $975 million. Analysts had expected three cents and $971.3 million.

All of those figures are good and in any regular market Cloudflare shares should have headed north. But solid beats in every expected metric were apparently not good enough for investors, as the company’s shares fell more than 12% in late trading. Barrons said the operating metrics hinted at moderating growth and this concerned investors, but it’s hard to see any emphasis of that in Cloudflare’s investor presentation.

Dollar-based net retention slid to 124% in the quarter, down from a peak of 127%, but any figure above 100% is considered good. Cloudbase’s long-term model has Cloudflare also improving on long-term metrics — cutting costs as a percentage of revenue as the business continues to grow.

It could have simply been that investors, as opposed to Wall Street analysts, had been expecting even better results than the ones that Cloudflare delivered.

Image: Cloudflare

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