Company: NET
Filing Date: 2025-07-31
Form Type: 10-Q
Source: 0001477333-25-000137
Chunk: 434

Company: Cloudflare, Inc.
Filing Date: 2025-07-31
Form: 10-Q
Item: Part I, Item 8
Chunk 434
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30, 2025.

Cost of Revenue and Gross Margin

Three Months EndedJune 30,ChangeSix Months EndedJune 30,Change20252024$%20252024$%(dollars in thousands)(dollars in thousands)Cost of revenue$128,677 $89,011 $39,666 45 %$244,253 $174,049 $70,204 40 %Gross margin75 %78 %75 %78 %

Cost of revenue increased by $39.7 million, or 45%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The increase in the cost of revenue was primarily due to an increase of $12.0 

44

million in expenses related to operating in co-location facilities and network and bandwidth costs for operating our global network for our expanded customer base, as well as increased capacity to support our growth, an increase of $11.7 million of third-party technology services costs, and an increase of $10.5 million in depreciation expense due to an increase in server acquisitions and deployments. 

Cost of revenue increased by $70.2 million, or 40%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The increase in the cost of revenue was primarily due to an increase of $22.4 million in expenses related to operating in co-location facilities and network and bandwidth costs for operating our global network for our expanded customer base, as well as increased capacity to support our growth, an increase of $21.8 million of third-party technology services costs, and an increase of $19.7 million in depreciation expense due to increase in server acquisitions and deployments. 

Gross margin decreased to 75% from 78%, for the three and six months ended June 30, 2025, compared to the three and six months ended June 30, 2024. The decrease in gross margin was primarily driven by an increase in depreciation expense and an increase in allocated cost due to higher network traffic volume by our paying customers.

Operating Expenses

Sales and Marketing

Three Months EndedJune 30,ChangeSix Months EndedJune 30,Change20252024$%20252024$%(dollars in thousands)(dollars in thousands)Sales and marketing$219,359 $174,501 $44,858 26 %$433,