This meeting detailed Cloudflare's financial performance in the second quarter of 2025, including its customers, suppliers, partners, operations, and future financial outlook. In addition, discussions also covered expected product releases, market potential, forecasts for future macroeconomic conditions, while emphasizing that all forward-looking statements are subject to uncertainty and cautioning investors to be aware of risks. The meeting concluded with the announcement of several important technical forums and conferences that the company will be attending.

In the second quarter, Cloudflare achieved a year-on-year growth of 28%, with revenue reaching $5.123 billion and annual run rate revenue exceeding $20 billion. The company has 3,712 customers who pay more than $100,000 annually, a 22% increase year-on-year, and revenue contribution from large customers has significantly increased. Its dollar-based net retention rate is 114%, with gross margin and operating profit reaching the expected targets and $72.3 million, respectively. The company emphasizes significant progress in innovation, sales capabilities, and growth in large customers, laying a solid foundation for future development.

Cloudflare achieved a series of important partnership victories this quarter, including signing a $15 million, 100-year fund pool contract with a rapidly growing AI company, as well as multiple contracts with Fortune 500 and global financial services companies, large state government entities, and leading digital travel companies. These partnerships cover various areas such as network resilience, zero trust solutions, security, and application services, showcasing Cloudflare's leading position in innovation, performance, and reliability. These customers chose Cloudflare's unified platform to enhance security, simplify architecture, and achieve significant cost savings.

Cloud computing companies are teaming up with media companies to tackle the challenges brought about by the transition from search engines to AI in the online world. With AI companies finding it much harder to generate traffic, this has impacted the advertising and subscription revenue of media companies. Cloud computing companies are working with major publishers to explore new business models in the AI-driven internet, not only to support content creators, but also to anticipate potentially broader opportunities for network transactions by building payment systems to facilitate transactions between AI companies and publishers in the future.

During this discussion, a cloud computing company detailed its performance growth in the second quarter, emphasizing strong performance in large customers, enterprise sectors, specific vertical industries, and developer platforms. The company's revenue increased by 28% year-on-year to $512.3 million, mainly due to the continuous growth of large customers, active development in vertical industries such as finance, public sector, retail, and media, advancement in developer platforms, and emphasis on security and resilience. Additionally, the company mentioned the expansion of the sales team and improvement in sales productivity.

In the second quarter, Cloudflare achieved significant revenue growth, with the US market contributing 49% growth, EMEA (Europe, Middle East, and Africa) region growing by 28%, and APAC (Asia-Pacific) region growing by 15%, with annual growth rates of 29% and 44% respectively. The company has over 266,000 paying customers, an increase of 15,000 from the previous quarter, with a higher proportion of revenue coming from large customers. The gross margin is 76.3%, slightly down but still within the long-term target range. Network capital expenditures accounted for 11% of revenue, with a full-year estimate of 12%-13%. In terms of operational efficiency, operating expenses decreased while operating income increased by 27% to $7.23 billion. Additionally, the company issued $2 billion in 0% convertible bonds and ended the second quarter with $40 billion in cash, cash equivalents, and marketable securities. Looking ahead, Cloudflare plans to accelerate growth through ongoing innovation and maintaining strong financial performance.

The company expects a growth in revenue of 26%-27% in the third quarter of 2025, and a full year revenue growth of 27%. It has also detailed the expected ranges for operating income, after-tax income, and earnings per share. At the same time, the company emphasizes its commitment to creating shareholder value through strict execution, continuous growth, and operational efficiency.

Cloudflare is exploring various business models for its network services, including but not limited to transaction-based micropayments and differential pricing, aiming to promote faster, more reliable, and more secure internet transactions. Although it is difficult to accurately predict revenue models at this stage, Cloudflare is committed to promoting widespread adoption of its services, ensuring that it becomes a universal translator for various protocols. Cloudflare strives to be compatible and provide support for any protocol used by users, whether it be MCP, Google, or Microsoft protocols.

Cloudflare detailed its unique architectural advantages in handling large-scale DDoS attacks, emphasizing that all of its servers have the ability to run all services without the need for a dedicated scrubbing center. This not only ensures efficiency in dealing with DDoS attacks but also helps control costs. Additionally, these architectural advantages extend to zero-trust services and other products, ensuring efficient and stable service on a global scale.

In the conversation, it was mentioned that the company has exceeded its financial targets and made significant progress in areas such as large clients, fund pool transactions, and variable income. The growth market team has also been successful in improving sales productivity and capacity, which has made the company confident in its future growth momentum. It is expected that this momentum will continue to have a positive impact in the second half of the year.

Cloudflare has significantly improved its ability to sign large deals by improving its market strategy and strengthening relationships with partners. In the past, the company relied mainly on the attractiveness of its products for growth, but when facing million-dollar deals, it was difficult to achieve solely based on product appeal. Therefore, Cloudflare enhanced direct relationships with buyers to help them understand the platform's full capabilities. Additionally, the company shifted towards a partner-centric sales strategy, accelerating sales growth through partner channels and facilitating deals with large transactions. The company's leadership is spending more time interacting with partners to ensure that Cloudflare becomes their premium partner, a strategy crucial for entering the upscale market and pursuing larger deals.

The dialogue explored the symbiotic relationship between AI technology companies and content creators, emphasizing the importance of original content for AI engines, as well as ensuring market fairness and equal access to content in building AI products. It also discussed how to establish a reasonable payment mechanism between AI companies and content creators to support the development of the ecosystem and ensure that both emerging and existing enterprises can compete fairly in the market.

The dialogue discussed the changing role of cloud service providers in the media industry, from initially being lacking in attractiveness to later becoming strategically important, especially when facing challenges such as CDM space renewal, pricing, and negotiations. It brought up the long-term value of free services for cloud service providers, emphasizing that by helping media companies generate revenue instead of directly earning from them, they may have a more significant impact. Additionally, it mentioned the demand of AI companies for comprehensive human knowledge, and how cloud services can meet this demand by providing access to unique content.

Cloudflare has established partnerships with 80% of major AI companies by providing security protection and global-scale inference capabilities. Its security services help AI companies defend against malicious requests and credit card fraud, while Cloudflare Workers AI can optimize model inference performance, meet regulatory requirements, and improve user experience. Cloudflare is continuing to invest in supporting larger-scale models and further expanding collaboration with AI companies.

During the discussion, a landmark company was mentioned to have strengthened its market strategy through acquisitions, along with potential issues that this strategy could bring, such as system complexity and security vulnerabilities. At the same time, the speaker emphasized the importance of internal research and innovation, stating that while large acquisitions are not ruled out, strict criteria will be set and there is a greater preference for driving the development of network and AI security through seamless development of its own technology and products.

Cloudflare has been elevated to the Visionary Quadrant in the Gartner single vendor quadrant, demonstrating its rapid product market deployment strategy and emphasis on user feedback, thus driving innovation speed ahead of its competitors. A recent example is successfully winning back a deal that was lost 18 months ago, indicating the company's competitiveness in the market and customer recognition of its products and services.

The Cloudflare team is rapidly innovating in the field of network security, successfully winning back customers in the market with faster deployment speeds, higher ROI, and ease of use. Despite facing challenges such as lack of market awareness and competition from rivals, Cloudflare has achieved significant success in competing with first-generation Sasi or Zero Trust suppliers through continuous innovation and cost advantages. Even with increasing global economic uncertainty, Cloudflare continues to receive market recognition for accelerating businesses and providing real security value.

The conversation discussed how to use cloud computing platforms, especially AI technology, to attract enterprises to migrate some or all of their workloads from traditional hyperscalers or on-premise deployments to using cloud computing platforms. The focus is on gradually establishing long-term partnerships with enterprises by demonstrating the migration benefits of individual key functions, such as cost savings, performance improvements, and enhanced security, with the ultimate goal of achieving large-scale business migration and gaining transactions in the millions or even billions. It also mentioned the formation of dedicated teams to specifically attract certain customers to accelerate this migration process.

The company discussed its strategies and trends in the federal government business, emphasizing the importance of FedRAMP certification. It was stated that they are expected to complete all certification requirements by the end of this year, which will enable the company to pursue federal government business opportunities without restrictions.

Discussed the significant growth of the large customer fund pool business in the second quarter, as well as the positive impact of this growth on bookings and consumption. Mentioned the contribution of the fund pool business to variable income and dollar net retention rate (DNR), emphasizing the positive effects being reaped with the maturity of the business and optimization of market strategies.

During this special period, the Cloudflare team has demonstrated outstanding execution in the face of major changes in the operations of the internet and artificial intelligence fields. The team is at the center of these trends, actively shaping the future. Matthew Prince expresses gratitude to the entire team and customers, and is looking forward to the future of Cloudflare, anticipating gathering again in the next quarter.