Company: NET
Filing Date: 2025-10-30
Form Type: 10-Q
Source: 0001477333-25-000141
Chunk: 417

Company: Cloudflare, Inc.
Filing Date: 2025-10-30
Form: 10-Q
Item: Part I, Item 8
Chunk 417
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 RSUs and PSUs11,194 10,462 Shares issuable pursuant to the ESPP113 169 Total32,492 27,045 

Note 12. Income Taxes

The computation of the provision for income taxes for interim periods is determined by applying the estimated annual effective tax rate to year-to-date earnings from recurring operations and adjusting for discrete tax items recorded in the period. The Company's ability to estimate the geographic mix of earnings is impacted by the relatively high-growth nature of the business, fluctuations of business operations by country, and implementation of tax planning strategies.The Company recorded an income tax expense of $3.1 million and $2.5 million for the three months ended September 30, 2025 and 2024, respectively, and an income tax expense of $8.0 million and $5.9 million for the nine months ended September 30, 2025 and 2024, respectively. The income tax expense of $3.1 million for the three months ended September 30, 2025 and $8.0 million for the nine months ended September 30, 2025 was primarily related to withholding taxes in the United States and income tax expense from foreign jurisdictions.

31

The income tax expense of $2.5 million for the three months ended September 30, 2024 was primarily related to withholding taxes in the United States and income tax expense from foreign jurisdictions. The income tax expense of $5.9 million for the nine months ended September 30, 2024 was primarily related to withholding taxes in the United States and income tax expense from foreign jurisdictions, offset by the partial release of the U.S. and U.K. valuation allowances in connection with acquisitions.In determining the need for a valuation allowance, the Company weighs both positive and negative evidence in the various jurisdictions in which it operates to determine whether it is more likely than not that its deferred tax assets are realizable. A full valuation allowance has been established in the United States and United Kingdom and no deferred tax assets and related tax benefits have been recognized in the condensed consolidated financial statements. There is no valuation allowance associated with any other foreign jurisdictions.On July 4, 2025, the United States signed into law the One Big Beautiful Bill Act (OBBBA), which, among other provisions, makes permanent the immediate expensing of domestic research and development expenditures, reinstates 100% bonus depreciation for certain qualified property, and modifies the international tax framework. The enactment of OBBBA resulted in