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What changed in Cloudflare, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Cloudflare, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+435 added−419 removedSource: 10-K (2026-02-26) vs 10-K (2025-02-20)

Top changes in Cloudflare, Inc.'s 2025 10-K

435 paragraphs added · 419 removed · 373 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

48 edited+2 added−10 removed61 unchanged
Biggest changeZero Trust Security These products shield users of a corporate network from attacks, inspect traffic for threats, and apply privilege rules to grant access to the customer's data and applications. • Cloudflare Access : Enforces Zero Trust application access based on identity. • Cloudflare Gateway : Filters all traffic crossing to customer employee devices to prevent malicious traffic reaching end-user devices. • Remote Browser Isolation : Runs a customer's browsers in the cloud as opposed to on-device, insulating devices from attacks. • Cloud Access Security Broker (CASB) : Provides visibility and control over SaaS applications to help prevent data leaks and compliance violations. 12 Table of contents • Cloud Email Security : Protects users of a corporate network from phishing, business email compromise, and email supply chain attacks. • Data Loss Prevention : Inspects HTTP/S traffic for sensitive data like personally identifiable information (PII) and prevents exfiltration of customer information with allow or block policies.
Biggest changeZero Trust and Workplace Security Services These products shield users of a corporate network from attacks, inspect traffic for threats, apply privilege rules to grant access to the customer's data and applications, and help organizations connect, secure, and accelerate their corporate networks without the cost and complexity of legacy hardware. • Cloudflare Zero Trust Network Access : Enforces Zero Trust application access based on identity, including authenticating users accessing applications, seamlessly onboarding third-party users, and logging every event and request. • Cloudflare Secure Web Gateway : Filters all traffic crossing to customer employee devices to prevent malicious traffic reaching end-user devices, including inspecting and filtering DNS, network, HTTP, and 12 Table of contents egress traffic to enforce acceptable use policies, blocking risky web sites with custom block lists and threat intelligence, and enhancing visibility and protection across SaaS applications. • Cloudflare One Client (WARP) : Protects corporate devices by privately sending traffic from those devices to our global network, builds device posture rules, and enforces security policies anywhere. • Remote Browser Isolation : Runs a customer's browsers in the cloud as opposed to on-device, mitigating the impact of attacks. • Cloud Access Security Broker : Provides visibility and control over SaaS applications to help prevent data leaks and compliance violations. • Cloud Email Security : Protects users of a corporate network from phishing, business email compromise, and email supply chain attacks. • Digital Experience Monitoring : Provides administrators with comprehensive, real-time visibility into the performance and connectivity of end-user devices, applications, and networks • Data Loss Prevention : Inspects web traffic and SaaS applications for sensitive data like personally identifiable information (PII) and prevents exfiltration of this data with allow or block policies.
Our primary consumer product offerings include: • 1.1.1.1 : A consumer DNS resolver app that provides a fast and private way to browse the Internet. 1.1.1.1 is a public DNS resolver, but unlike most DNS resolvers, we do not sell user data to advertisers.
Our primary consumer product offerings include: • 1.1.1.1 DNS : A consumer DNS resolver app that provides a fast and private way to browse the Internet. 1.1.1.1 is a public DNS resolver, but unlike most DNS resolvers, we do not sell user data to advertisers.
The basic version of WARP is included as an option with the 1.1.1.1 App for free, and a premium version that accelerates a user's Internet access is available for purchase. • Cloudflare Registrar : Offers secure registration and management of domain names.
The basic version of WARP is included as an option with the 1.1.1.1 app for free, and WARP+, a premium version that accelerates a user's Internet access is available for purchase. • Cloudflare Registrar : Offers secure registration and management of domain names.
By using a combination of web self-service, direct sales, and indirect sales, we are able to serve customers across a wide range of sizes, geographies, and vertical markets.
By using a combination of direct sales, indirect sales, and web self-service, we are able to serve customers across a wide range of sizes, geographies, and vertical markets.
Our Products We deliver a suite of deeply integrated products that serve as a unified control plane for our customers, allowing them to build, connect, and secure web applications and corporate infrastructure. Customers can quickly and easily join Cloudflare by using just one of our products and then expand their usage of Cloudflare over time by adding additional products.
Our Products We deliver a suite of deeply integrated products that serve as a unified control plane for our customers, allowing them to build, connect, and secure applications and corporate infrastructure. Customers can quickly and easily join Cloudflare by using just one of our products and then expand their usage of Cloudflare over time by adding additional products.
SASE Platform Our SASE platform combines network services and Zero Trust security products to provide a comprehensive, cloud-based network- and security-as-a-service solution that is designed to be secure, fast, reliable, and define the future of the corporate network.
SASE Platform Our SASE platform combines network services and Zero Trust and workplace security products to provide a comprehensive, cloud-based network and security-as-a-service solution that is designed to be secure, fast, reliable, and define the future of the corporate network.
We offer self-service access to certain of our products through our website and hosting partners where customers can either start on a free or paid plan and, as we demonstrate value, upgrade over time.
We also offer self-service access to certain of our products through our website and hosting partners where customers can either start on a free or paid plan and, as we demonstrate value, upgrade over time.
Website and Application Performance Our website and application performance solutions improve conversions, reduce churn, and improve visitor experiences by accelerating web and mobile performance, while keeping applications available and allowing our customers to run their digital operations much more efficiently.
Application Performance Our application performance solutions improve conversions, reduce churn, and improve visitor experiences by accelerating web and mobile performance, while keeping applications available and allowing our customers to run their digital operations much more efficiently.
Website and Application Security We provide an integrated cloud-based security solution designed to secure any combination of platforms, including public cloud, private cloud, on-premises, SaaS applications, and “Internet of things” devices.
Application Security We provide an integrated cloud-based security solution designed to secure any combination of platforms, including public cloud, private cloud, on-premises, SaaS applications, and “Internet of things” devices.
In 2022, 2023, and 2024, Cloudflare has been recognized as one of the Top 100 Most Loved Workplaces by Newsweek and the Best Practice Institute. Compensation and Benefits We believe that attracting, motivating, and retaining talent at all levels is vital to our success. Our total rewards programs are built to engage employees, provide support, and encourage career best performance.
In 2023, 2024, and 2025, Cloudflare has been recognized as one of the Top 100 Most Loved Workplaces by Newsweek and the Best Practice Institute. Compensation and Benefits We believe that attracting, motivating, and retaining talent at all levels is vital to our success. Our total rewards programs are built to engage employees, provide support, and encourage career best performance.
Our network has been built from the ground up as a single software stack we developed that runs our products in more than 335 cities and over 125 countries worldwide. This allows us to scale quickly while offering a wide range of products and simultaneously lowering operating expenses.
Our network has been built from the ground up as a single software stack we developed that runs our products in more than 330 cities and over 125 countries worldwide. This allows us to scale quickly while offering a wide range of products and simultaneously lowering operating expenses.
Today, our network spans more than 335 cities in over 125 countries worldwide and interconnects with over 13,000 networks globally, including major ISPs, cloud services, and enterprises. 9 Table of contents Increasingly, we are finding that our customers are also using our network to build their applications too.
Today, our network spans more than 330 cities in over 125 countries worldwide and interconnects with over 13,000 networks globally, including major ISPs, cloud services, and enterprises. 9 Table of contents Increasingly, we are finding that our customers are also using our network to build their applications too.
Refer to Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information regarding the definitions of our "paying customers" and "large customers." No single customer accounted for more than 10% of our revenue in the years ended December 31, 2022, 2023, or 2024.
Refer to Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information regarding the definitions of our "paying customers" and "large customers." No single customer accounted for more than 10% of our revenue in the years ended December 31, 2023, 2024, or 2025.
An additional version of our consumer DNS resolver known as 1.1.1.1 for Families adds a layer of protection to consumer home networks and protects them from malware and adult content. • WARP : A virtual private network (VPN) for consumers designed to secure and accelerate traffic on mobile devices.
An additional version of our consumer DNS resolver known as 1.1.1.1 for Families adds a layer of protection to consumer home networks and protects them from malware and adult content. • 1.1.1.1 with WARP : A virtual private network (VPN) app for consumers designed to secure and accelerate traffic on mobile devices.
The principal competitive factors in the markets in which we operate include: • breadth of network and product features and continued innovation; • integrated solutions across security, performance, and reliability; • unified control plane across on-premises, cloud, hybrid, and SaaS infrastructure; • performance, availability, and effectiveness; • network scalability; • total cost of ownership; • ease of adoption and use; • global network coverage; • quality of customer support; • programmability and extensibility of platform; and • independence, reputation, and trust.
The principal competitive factors in the markets in which we operate include: • breadth of network and product features and continued innovation; • integrated solutions across security, performance, and reliability; • unified control plane across on-premises, cloud, hybrid, and SaaS infrastructure; • performance, availability, and effectiveness; • network scalability; • total cost of ownership; 17 Table of contents • ease of adoption and use; • global network coverage; • quality of customer support; • programmability and extensibility of platform; and • independence, reputation, and trust.
Media • Cloudflare Stream : Enables live and on-demand video streaming from our global network. • Cloudflare Images : Provides an end-to-end solution to cost-effectively build and maintain image infrastructure. • Cloudflare Calls : Enables developers to build real-time audio and video applications.
Media • Cloudflare Stream : Enables live and on-demand video streaming from our global network. • Cloudflare Images : Provides an end-to-end solution to cost-effectively build and maintain image infrastructure. • Cloudflare Realtime : Enables developers to build real-time audio and video applications.
Cloudflare Impact — the platform for our corporate social responsibility and sustainability programs — was launched in 2021 and is organized around three core beliefs: • a better Internet is principled; • a better Internet is for everyone; and • a better Internet is sustainable.
Cloudflare Impact Cloudflare Impact — the platform for our corporate responsibility and sustainability — was launched in 2021 and is organized around three core beliefs: • a better Internet is principled; • a better Internet is for everyone; and • a better Internet is sustainable.
We have built coordination software that ties together these thousands of machines into a single global network that allows us to efficiently route traffic to different physical locations and to individual machines. This enables us to maximize utilization of our commodity hardware and provide different service levels to different customers.
We have built coordination software that ties together these thousands of machines into a 15 Table of contents single global network that allows us to efficiently route traffic to different physical locations and to individual machines. This enables us to maximize utilization of our commodity hardware and provide different service levels to different customers.
It also allows our network to get more efficient and powerful as we add each incremental server, regardless of where it is located. Every time we add a server or add a new city, our entire network improves. Network Flexibility 15 Table of contents Our network and products are API-driven and designed for developers.
It also allows our network to get more efficient and powerful as we add each incremental server, regardless of where it is located. Every time we add a server or add a new city, our entire network improves. Network Flexibility Our network and products are API-driven and designed for developers.
Intellectual Property Our success depends in part upon our ability to protect and use our core technology and intellectual property rights. We rely on a combination of patents, copyrights, trademarks, trade secrets, know-how, contractual provisions, and 18 Table of contents confidentiality procedures to protect our intellectual property rights.
Intellectual Property Our success depends in part upon our ability to protect and use our core technology and intellectual property rights. We rely on a combination of patents, copyrights, trademarks, trade secrets, know-how, contractual provisions, and confidentiality procedures to protect our intellectual property rights.
Additional information regarding our sustainability initiatives and programs can be found in the latest Cloudflare Impact Report, which is located on our website at https://www.cloudflare.com/impact/. The Cloudflare Impact Report, as well as the sustainability resources and Emissions Inventory, are updated annually. This website address is intended to be an inactive textual 14 Table of contents reference only.
Additional information regarding our sustainability initiatives and programs can be found in the latest Cloudflare Impact Report, which is located on our website at https://www.cloudflare.com/impact/. The Cloudflare Impact Report, as well as the sustainability resources and Emissions Inventory, are updated annually. This website address is intended to be an inactive textual reference only.
Our paying customer base is highly diversified across organizations of all sizes in every major industry vertical including technology, healthcare, financial services, consumer and retail, industrial, non-profit, and government. Our large customer count has increased from 2,042 as of December 31, 2022 to 2,756 as of December 31, 2023 to 3,497 as of December 31, 2024.
Our paying customer base is highly diversified across organizations of all sizes in every major industry vertical including technology, healthcare, financial services, consumer and retail, industrial, non-profit, and government. Our large customer count has increased from 2,756 as of December 31, 2023 to 3,497 as of December 31, 2024 to 4,298 as of December 31, 2025.
Our Customers We view our millions of free and paying customers, which manage millions of Internet properties on our network, as part of a broad, global community. As of December 31, 2024, we had approximately 238,000 paying customers across more than 190 countries.
Our Customers We view our millions of free and paying customers, which manage millions of Internet properties on our network, as part of a broad, global community. As of December 31, 2025, we had approximately 332,000 paying customers across more than 190 countries.
Our 13 Table of contents implementation of 1.1.1.1 makes it among the fastest resolvers available, and we support DNS over HTTPS (DoH) which encrypts and secures consumers’ DNS requests.
Our implementation of 1.1.1.1 makes it among the fastest resolvers available, and we support DNS over HTTPS (DoH) which encrypts and secures consumers’ DNS requests.
As pay-as-you-go customers evolve their usage of our products, some upgrade to an Enterprise plan for greater control, higher service levels and terms, or productivity-related tools while existing contracted customers can add their increased usage or expanded products to their bills. We refer to customers on an Enterprise plan as “contracted” customers.
As pay-as-you-go customers evolve their usage of our products, some upgrade to an Enterprise plan for greater control, higher service levels and 16 Table of contents terms, or productivity-related tools while existing contracted customers can add their increased usage or expanded products to their bills.
As of December 31, 2024, we had 334 issued patents and 72 pending patent applications in the United States and abroad. These patents and patent applications seek to protect our proprietary inventions relevant to our business. Our issued patents are scheduled to expire between 2030 and 2044, and cover various aspects of our network and products.
As of December 31, 2025, we had 381 issued patents and 58 pending patent applications in the United States and abroad. These patents and patent applications seek to protect our proprietary inventions relevant to our business. Our issued patents are scheduled to expire between 2030 and 2045, and cover various aspects of our network and products.
Storage & Databases • R2 Object Storage : Provides global object storage without egress frees. • Workers KV : Helps developers manage states for their applications with a globally distributed key-value storage. • Durable Objects : Enables a customer to build and run collaborative applications, such as chat rooms, games, and whiteboards, on our global network. • D1 : Enables developers to create serverless SQL databases. • Hyperdrive : Accelerates queries to databases by caching frequent query responses, maintaining primed connection pools, and optimizing routing.
Storage & Databases • R2 Object Storage : Provides global object storage without egress frees. • D1 : Enables developers to create serverless SQL databases. • Workers KV : Helps developers manage states for their applications with a globally distributed key-value storage. • Durable Objects : Enables a customer to build and run collaborative applications, such as chat rooms, games, and whiteboards, on our global network. • Hyperdrive : Accelerates queries to databases by caching frequent query responses, maintaining primed connection pools, and optimizing routing. 13 Table of contents • Queues : Adds reliable message queues to process tasks asynchronously and improve reliability and performance.
We value diversity at all levels and are committed to promoting the advancement of leaders from different backgrounds. We work with our managers to develop strategies for increasing the diversity of their teams and ensuring inclusion, equity, and fairness.
We remain committed to extending our diversity and inclusion initiatives across our global workforce. 18 Table of contents We value diversity at all levels and are committed to promoting the advancement of leaders from different backgrounds. We work with our managers to develop strategies for increasing the diversity of their teams and ensuring inclusion, equity, and fairness.
We have fostered an inclusive culture through the development of employee-led communities, educational offerings, incorporating behaviors into performance, and reviews of our processes and policies for fairness and inclusion. We remain committed to extending our diversity and inclusion initiatives across our global workforce.
We have fostered an inclusive culture through the development of employee-led communities, educational offerings, incorporating behaviors into performance, and reviews of our processes and policies for fairness and inclusion.
We believe that we are positioned favorably against our competitors based on these principal competitive factors. Human Capital Resources 17 Table of contents As of December 31, 2024, we had 4,263 full-time employees, including 1,896 employees located outside of the United States. We also engage contractors and consultants.
We believe that we are positioned favorably against our competitors based on these principal competitive factors. Human Capital Resources As of December 31, 2025, we had 5,156 full-time employees, including 2,452 employees located outside of the United States. We also engage contractors and consultants.
We provide eligible school districts with Zero Trust security solutions that help minimize exposure to harmful online content and common cyber threats, such as phishing and credential harvesting, for free and with no time limit. Currently, more than 131 school districts in 30 U.S. states participate in the Project Cybersafe Schools program.
Through the program, we provide eligible public school districts with Zero Trust and workplace security solutions that help minimize exposure to harmful online content and common cyber threats, such as phishing and credential harvesting, for free. Currently, more than 230 school districts in 30 U.S. states receive free services through the program.
We sell directly to contracted customers through our global, technically-oriented inside and field sales teams, and indirectly through our ecosystem of channel partners that includes managed service providers, resellers, distributors, and global system integrators.
We sell our products under our Enterprise plans directly to customers through our global, technically-oriented inside and field sales teams, and indirectly through our ecosystem of channel partners that includes managed service providers, resellers, distributors, and global system integrators. We refer to our customers on an Enterprise plan as “contracted” customers.
Our cloud-based products provide local and global load balancing to reduce latency by distributing traffic across multiple servers or by routing traffic to the closest geolocation region to the user. • DNS : Authoritative DNS keeps customer Internet properties online and available around the world, and DNS resolver returns the IP addresses of servers when a user enters a domain name. • Argo Smart Routing : Improves Internet performance by intelligently routing end users through less congested and more reliable paths over the Internet using our network. • Video Stream Delivery : Caches and delivers HTTP(S) video content on websites, saving the customer on origin server bandwidth costs. 11 Table of contents • Web Optimization : Adjusts automatically the way content is delivered based on the particular device accessing the site to improve speed without affecting the customer’s Internet property look or features. • Cache Reserve : Serves a limited copy of a cached website, to keep it online for a customer’s visitors should the customer’s origin server go down. • Cloudflare Waiting Room : Allows organizations to route large volumes of users to a custom-branded virtual waiting room, helping preserve customer experience and protect origin servers from being overwhelmed with requests. • Cloudflare Data Localization Suite : Sets rules and controls at the network edge about where data is stored and protected, while taking advantage of Cloudflare's global network.
Our primary application performance product offerings include: • Content Delivery : Accelerates content delivery time by automatically serving our customers' most popular content from our network locations close to our customers’ users. • Load Balancing : Enhances performance and reliability for single, hybrid-cloud, and multi-cloud environments using local and global load balancing to reduce latency by distributing traffic across multiple servers or by routing traffic to the closest geolocation region to the user. • DNS : Authoritative DNS keeps customer Internet properties online and available around the world, and DNS resolver returns the Internet Protocol (IP) addresses of servers when a user enters a domain name. 11 Table of contents • Smart Shield : Improves Internet performance by combining intelligent routing over the Internet using our network, connection reuse, cache reserves, and dedicated egress IP addresses. • Video Stream Delivery : Caches and delivers HTTP(S) video content on websites, saving the customer on origin server bandwidth costs. • Web Optimization : Adjusts automatically the way content is delivered based on the particular device accessing the site to improve speed without affecting the customer’s Internet property look or features. • Cloudflare Waiting Room : Allows organizations to route large volumes of users to a custom-branded virtual waiting room, helping preserve customer experience and protect origin servers from being overwhelmed with requests. • Cloudflare Data Localization Suite : Sets rules and controls at the network edge about where data is stored and protected, while taking advantage of our global network.
Our full suite of products consists of (1) our website and application services to deliver security, performance, and reliability for an organization's websites, applications, and application programming interfaces (APIs), (2) our secure access service edge (SASE) platform, which contains our suite of Zero Trust and network services solutions to help ensure traffic in and out of an organization’s internal network and devices is verified and authorized as well as to securely connect data centers, cloud services, and branch offices to an organization with our Connectivity Cloud, (3) our developer-based solutions to build and deploy serverless applications with scale, performance, security and reliability, and (4) our consumer offerings.
Our full suite of products consists of (1) our application services that help deliver security, performance, and reliability for any organization's applications connected to the Internet, including websites and application programming interfaces (APIs), and that also form the foundation of our newly announced efforts to allow content creators to monetize their work by controlling how bots, crawlers, and agents access their work; (2) our secure access service edge (SASE) platform, which contains our suite of Zero Trust and workplace security services and network services solutions to help ensure traffic in and out of an organization’s network and devices is verified and authorized and data is protected and secured, as well as to securely connect data centers, cloud services, and branch offices to an organization with our Connectivity Cloud; (3) our developer-based solutions to 10 Table of contents build and deploy serverless and AI applications with scale, performance, security and reliability: and (4) our consumer offerings.
We drive organic awareness and adoption of our products by providing a free offering that enables millions of users to experience the benefits of our global network before they adopt our pay-as-you-go offerings or contract 16 Table of contents for our Enterprise plan.
We drive organic awareness and adoption of our products by providing a free offering that enables millions of users to experience the benefits of our global network before they adopt our pay-as-you-go offerings or contract for our Enterprise plan. We engage with developers across blogs, social media, and other channels to help build our brand and visibility among technical communities.
Cloudflare participates in periodic independent GNI Assessments, which include comprehensive audits of our human rights related policies, practices, and impacts. Our Board of Directors, through its nominating and corporate governance committee, oversees Cloudflare Impact and its related corporate social responsibility and sustainability programs.
We also participate in independent GNI Assessments, which include comprehensive review of our human rights related policies, processes, and impacts by leading academic and civil society experts. Our Board of Directors, through its nominating and corporate governance committee, oversees Cloudflare Impact and its related programs.
As a signatory to the United Nations Global Compact, we are committed to the United Nations Ten Principles and supporting the United Nations Sustainable Development Goals, with annual tracking of our progress.
As a signatory to the United Nations Global Compact, we are committed to the United Nations Ten Principles and supporting the United Nations Sustainable Development Goals, with annual tracking of our progress. To that end, we publish our company-wide emissions consistent with the Greenhouse Gas Protocol, and climate-related financial 14 Table of contents risks.
By leveraging the public Internet, Cloudflare’s SASE platform brings together in a single pane of glass how employees connect, on-ramps for branch offices, secure connectivity for applications, and controlled access to SaaS applications. Network Services These products help our customers connect, secure, and accelerate their corporate networks, without the need to manage legacy network hardware.
By leveraging the public Internet, our SASE platform brings together in a single pane of glass how employees connect, on-ramps for branch offices, secure connectivity for applications, and controlled access to SaaS applications while safeguarding the adoption of AI at scale.
Our primary website and application security product offerings include: • Web Application Firewall (WAF) : Protects a customer’s Internet properties from common vulnerabilities like SQL injection attacks, cross-site scripting, and cross-site forgery requests, with no changes to the customer’s existing infrastructure. • Bot Management : Detects and manages undesired or malicious Internet traffic generated by malicious software programs called bots, while still allowing useful bots to access Internet properties through machine learning and behavioral analytics. • Distributed Denial of Service (DDoS) Protection : Protects a customer’s website applications from DDoS attacks, which are malicious attempts to disrupt the normal operations of an application, targeted server, service or network by overwhelming the target or its surrounding infrastructure with a flood of Internet traffic. • API Security (API Shield) : Keeps customer APIs secure and productive with API discovery, integrated API management and analytics, and layered API defenses. • SSL / TLS Encryption : Manages encrypted secure socket layer (SSL) and transport layer security (TLS) web traffic to prevent data theft and tampering to improve security as well as application and website productivity.
Our primary application security product offerings include: • Web Application Firewall (WAF) : Protects a customer’s Internet properties from common vulnerabilities like SQL injection attacks, cross-site scripting, and cross-site forgery requests, with no changes to the customer’s existing infrastructure, and also provides the ability to configure thresholds, define responses, and apply throttling rules across web applications and API endpoints. • Bot Management : Detects and manages undesired or malicious Internet traffic generated by malicious software programs called bots, while still allowing useful bots to access Internet properties through machine learning and behavioral analytics, and also includes Turnstile, our client side no-captcha alternative that can be deployed on any applications, including those that are not actively using our global network. • Distributed Denial of Service (DDoS) Mitigation : Protects a customer’s website applications, TCP/UDP applications, and networks and data centers alike, across network systems layers 3, 4, and 7 from DDoS attacks, which are malicious attempts to disrupt the normal operations of an application, targeted server, service or network by overwhelming the target or its surrounding infrastructure with a flood of Internet traffic. • API Security (API Shield) : Keeps customer APIs secure and productive with API discovery, integrated API management and analytics, and layered API defenses. • SSL / TLS Encryption : Manages encrypted secure socket layer (SSL) and transport layer security (TLS) web traffic to prevent data theft and tampering to improve security, as well as application and website productivity, and also provides with our Advanced Certificate Manager a consolidated certificate management experience with greater configuration for managing multiple certificates. • Client-Side Security (Page Shield) : Protects website visitors from customer-side attacks that target vulnerabilities directly in the browser environment. • Security Center : An actionable dashboard that provides insights into threats, risks, and configuration suggestions, acting as a security practitioner’s home page and summarizing insights from the all of our Application Security suite of products.
Compute • Cloudflare Workers : Allows developers to augment existing applications or create entirely new ones through a lightweight execution environment without configuring or maintaining infrastructure. • Cloudflare Pages : Allows front-end developers to quickly and easily build, collaborate on, and deploy websites.
Compute • Cloudflare Workers : Allows developers to augment existing applications or create entirely new ones through a lightweight execution environment without configuring or maintaining infrastructure and to identify changes that impact end-user experience with first-party telemetry. • Cloudflare Workers for Platforms : Provides a managed execution environment for our multi-tenant platform customers where their customers can deploy and run their own code on our global network. • Cloudflare Pages : Allows front-end developers to quickly and easily build, collaborate on, and deploy websites.
To that end, we document and publish our company-wide direct and indirect emissions consistent with the Greenhouse Gas Protocol, and have committed to powering our operations with 100% renewable energy based on methodology developed by RE100, a global corporate renewable energy initiative.
We also are committed to powering our operations with 100% renewable energy based on methodology developed by RE100, a global corporate renewable energy initiative, and setting near-term company-wide emissions reductions in line with climate science with the Science Based Targets initiative.
Competition We compete in the market for network services primarily across three categories: • On-premises network hardware vendors . We compete with companies in this category to provide security, performance, and reliability services.
We compete with companies in this category to provide security, performance, and reliability services.
We are also committed to respecting human rights under the United Nations Guiding Principles on Business and Human Rights, and advancing and protecting freedom of expression and privacy consistent with the Global Network Initiative (GNI) Principles.
We respect human rights under the United Nations Guiding Principles on Business and Human Rights, and advance and protect freedom of expression and privacy consistent with the Global Network Initiative (GNI) Principles. As part of those commitments, we continue to develop our internal human rights practice, including human rights training, due diligence, and engagement.
We invest in a variety of targeted digital and non-digital marketing activities and programs to build awareness, engage with prospects, and build pipeline for our global sales teams. We also share stories of how large customers are rapidly adopting our services across use cases, industry verticals, and geographies, to communicate customer trust and our market momentum.
We also share stories of how large customers are rapidly adopting our services across use cases, industry verticals, and geographies, to communicate customer trust and our market momentum. Competition We compete in the market for network services primarily across three categories: • On-premises network hardware vendors .
We engage with developers across blogs, social media, and other channels to help build our brand and visibility among technical communities. In addition, our consumer products, including 1.1.1.1 and WARP, provide an effective and differentiated marketing channel to expand the awareness of our brand.
In addition, our consumer products, including 1.1.1.1 and WARP, provide an effective and differentiated marketing channel to expand the awareness of our brand. We invest in a variety of targeted digital and non-digital marketing activities and programs to build awareness, engage with prospects, and build pipeline for our global sales teams.
Initiatives We Support In support of our mission, we have launched various initiatives to help build a better Internet, including: • Project Galileo : Since 2014, we have equipped at-risk public interest groups with a set of our products at no cost to defend themselves against attacks that would otherwise censor their work.
Initiatives We Support We also have launched various impact initiatives as part of our mission to help build a better Internet, including: • Project Galileo : Since 2014, we have provided free services to at-risk journalists, human rights defenders, and civil society organizations, at no cost.
This suite of products also includes analytics products to provide a customer with the ability to build customized analytics to provide insights and intelligence to further protect and accelerate their Internet properties, such as monitoring threats, searching for specific search engine crawlers, understanding DNS query traffic, and analyzing real time data traffic.
Application Services Cloudflare offers a suite of application services products (i) to help ensure that Internet properties such as websites, applications, and APIs that are exposed to the Internet are safe from attacks, and are fast and reliable; (ii) to provide customers with the ability to build customized analytics for insights and intelligence to further optimize and secure their applications, such as monitoring for threats, understanding search engine crawler behavior and domain name system (DNS) query traffic, and analyzing any other real time data traffic; and (iii) to easily identify, block and control access from AI crawlers and AI agents and operators, a growing concern for content creators and website operators.
During the 2024 election cycle in the United States, Cloudflare held more than 50 onboarding and support calls with state and local governments participating in the Athenian Project, and provided cyber threat briefings for more than 300 election officials across the country. • Cloudflare for Campaigns : Since 2020, the Cloudflare for Campaigns program has provided security services to help political campaigns and state political parties in the United States and around the world defend against cyber attacks and election interference.
We currently protect more than 440 state and local election websites in 33 U.S. states, as well as election entities in six additional countries. • Cloudflare for Campaigns : Since 2020, the Cloudflare for Campaigns program has provided free security services to help candidates for public office and political parties in the United States defend against cyber attacks and election interference. • Project Cybersafe Schools : We launched Project Cybersafe Schools in 2023 as part of the U.S. government's Back to School Safely: K-12 Cybersecurity Summit.
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Website and Application Services 10 Table of contents Cloudflare offers a suite of website and application services products to help ensure that Internet properties such as websites, applications, and APIs that are exposed to the Internet are safe from attack, and are fast and reliable.
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Network Services These products help our customers connect, secure, and accelerate their corporate networks, without the cost and complexity of legacy network hardware.
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Advanced Certificate Manager (ACM) also provides a consolidated certificate management experience with greater configuration for managing multiple certificates. • Rate Limiting : Provides the ability to configure thresholds, define responses, and apply throttling rules across web applications and API endpoints. • Script Management (Page Shield) : Protects website visitors from customer-side attacks that target vulnerabilities directly in the browser environment. • Security Center : An actionable dashboard that provides insights into threats, risks, and configuration suggestions, acting as a security practitioner’s home page.
Added
The program now includes more than 3,000 domains operated by organizations in more than 120 countries. • Athenian Project : We created the Athenian Project in 2017 to provide U.S. state and local governments’ election websites with our highest level of security and reliability services for free.
Removed
Our primary website and application performance product offerings include: • Content Delivery : Accelerates content delivery time by automatically serving our customers' most popular content from our network locations close to our customers’ users. • Load Balancing : Enhances performance and reliability for single, hybrid-cloud, and multi-cloud environments.
Removed
Cloudflare Impact We believe a better Internet can be not only a force for good but also an engine of global sustainability.
Removed
In 2023, we committed to setting near-term company-wide emissions reductions in line with climate science with the Science Based Targets initiative (SBTi), and as required by SBTi, we expect to submit our proposed reduction targets in 2025.
Removed
As part of those commitments, we continue to develop our internal human rights practice, including mandatory human rights training for all employees, incorporating human rights due diligence into our operations, and multi-stakeholder engagement including through GNI and the United Nations Human Rights Office of the High Commissioner's B-Tech Project, Community of Practice.
Removed
In December 2022, we extended our Zero Trust security solutions to organizations under Project Galileo at no cost to further protect against security problems such as data loss, malware, and phishing.
Removed
The more than 2,900 recipients of services under Project Galileo include independent journalists reporting on repressive regimes, minority rights and arts groups in closed societies, and civil society organizations supporting democratic movements. • Athenian Project : We created the Athenian Project to ensure that U.S. state and local governments’ election websites have the highest level of protection and reliability for free through a variety of our security solutions, including Enterprise DDoS protection, web application firewall, SSL certificates, content delivery network, and Zero Trust security solutions.
Removed
We have provided these benefits to more than 425 state and local election websites.
Removed
We allow any eligible campaign to access a variety of our security solutions, including web application firewall, and DDoS protection, as well as internal data management and security controls. • Project Cybersafe Schools : We launched Project Cybersafe Schools in 2023 as part of the White House's Back to School Safely: K-12 Cybersecurity Summit.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeMany of our existing and potential competitors have or could have substantial competitive advantages including, among others: • greater name recognition; • longer operating histories; • larger customer bases; • larger sales and marketing budgets and capital resources; • broader distribution and established relationships with channel partners and customers; • greater customer support resources; • greater resources to make acquisitions and enter into strategic partnerships; • lower labor and research and development costs; • more mature products and services developed for large customers; • larger and more mature intellectual property rights portfolios; • control of significant technologies, standards, or networks, including operating systems, with which our products must interoperate; • higher or more difficult to obtain security certifications than we possess; and • substantially greater financial, technical, and other resources. 26 Table of contents In addition, some of our larger competitors have substantially broader and more diverse product and services offerings, which may allow them to leverage existing commercial relationships, incorporate functionality into existing products, sell products and services with which we compete at zero or negative margins, offer fee waivers and reductions or other economic and non-economic concessions, bundle products and solutions, maintain closed technology platforms, or render our products unable to interoperate with such platforms.
Biggest changeOur current competitors include a number of different types of companies, including: • on-premises network hardware vendors; • point solution vendors, which provide cloud-based products and services to address a single use case or challenge, in various categories including cloud security vendors, content delivery network (CDN) vendors, domain name system (DNS) services vendors, email security vendors, and cloud SD-WAN vendors; and • traditional public cloud vendors. 26 Table of contents Many of our existing and potential competitors have or could have substantial competitive advantages including, among others: • greater name recognition; • longer operating histories; • larger customer bases; • larger sales and marketing budgets and capital resources; • broader distribution and established relationships with channel partners and customers; • greater customer support resources; • greater resources to make acquisitions and enter into strategic partnerships; • lower labor and research and development costs; • more mature products and services developed for large customers; • larger and more mature intellectual property rights portfolios; • control of significant technologies, standards, or networks, including operating systems, with which our products must interoperate; • higher or more difficult to obtain security certifications than we possess; and • substantially greater financial, technical, and other resources.
There are numerous federal, state, local, and international laws and regulations regarding privacy, data protection, information security, and the storing, sharing, use, processing, transfer, disclosure, and protection of personal information and other content, the scope of which are changing, subject to differing interpretations, and may be inconsistent among jurisdictions, or conflict with other rules.
There are numerous federal, state, local, and international laws and regulations regarding privacy, data protection, information security, and the storing, sharing, protection use, transfer, disclosure, and other processing of personal information and other content, the scope of which are changing, subject to differing interpretations, and may be inconsistent among jurisdictions, or conflict with other rules.
Net operating loss carryforwards and other tax assets could expire before utilization and could be subject to limitations, which could harm our business and financial results. It is also possible that federal, state, and non-U.S. tax authorities will enact additional legislation limiting our ability to use our carryforwards, some of which may adversely impact our business.
Net operating loss carryforwards and other tax assets could expire before utilization and could be subject to limitations, which could harm our business and financial results. It is also possible that U.S. federal and state and non-U.S. tax authorities will enact additional legislation limiting our ability to use our carryforwards, some of which may adversely impact our business.
This problem is exacerbated by the fact that a single Cloudflare IP address may be used for a number of Internet properties, and the Cloudflare IP used for any one Internet property may change over time. This means that efforts by ISPs to block a single domain name may end up blocking a number of other domains or content.
This problem is exacerbated by the fact that a single Cloudflare IP address may be used for a number of Internet properties, and the Cloudflare IP address used for any one Internet property may change over time. This means that efforts by ISPs to block a single domain name may end up blocking a number of other domains or content.
Some of these blocking efforts would be out of our control once they have been put in place and may limit our ability to provide our products on a fully global basis, which could reduce demand for our products among current or potential customers that are focused on the impacted regions or could otherwise adversely impact our business, results of operations, and financial condition.
Some of these blocking efforts may be out of our control once they have been put in place and may limit our ability to provide our products on a fully global basis, which could reduce demand for our products among current or potential customers that are focused on the impacted regions or could otherwise adversely impact our business, results of operations, and financial condition.
If one or more holders elect to convert their 2026 Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our Class A common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
We expect competition to increase as other established and emerging companies and start-ups enter the markets for products and solutions for security, performance, and reliability, in particular with respect to cloud-based solutions, as customer requirements evolve and as new products, services, and technologies, including those that leverage artificial intelligence and machine learning, are introduced.
We expect competition to increase as other established and emerging companies and start-ups enter the markets for products and solutions for security, performance, and reliability, in particular with respect to cloud-based solutions, as customer requirements evolve and as new products, services, and technologies, including those that leverage artificial intelligence (AI) and machine learning, are introduced.
Further, our expansion into a variety of new fields also could raise a number of new regulatory issues. These factors could negatively affect our business and results of operations in material ways. Our actual or perceived failure to comply with privacy, data protection, information security, and other applicable laws, regulations, and obligations could harm our business.
Further, our expansion into a variety of new fields also could raise a number of new regulatory issues. These factors could negatively affect our business and results of operations in material ways. Our actual or perceived failure to comply with privacy, data protection, information security, AI, and other applicable laws, regulations, and obligations could harm our business.
Attracting, expanding, and retaining sales to large customers involve risks that may not be present, or that are present to a lesser extent, with sales to smaller customers, including: • competition from companies that traditionally target larger enterprises and that may have pre-existing relationships or purchase commitments from such larger enterprise customers, including companies that seek to bundle sales of their new or existing products that are competitive to our products, or that may have 23 Table of contents more experienced sales personnel or greater budgetary resources available or committed to such larger enterprise customers; • longer evaluation periods, more detailed evaluations, and more cumbersome contract negotiation and approval processes, including potential requirements for such purchasing decisions to be approved by senior executives of such companies; • increased purchasing power and leverage in negotiating pricing terms and other contractual arrangements with us, which may result in us being subject to additional, or greater levels of, contractual risks than our sales to smaller customers; • requirements for more technically complex configurations, integrations, deployments, or features; • greater customer support or assistance with migrating their systems from another vendor to our network and products; • more stringent requirements in terms of the security, performance, and reliability of our products and our network and our support and compliance obligations related to our products; • increased usage of our global network that may require us to incur greater network infrastructure expenditures; and • longer sales cycles and the associated risk that substantial time and resources may be spent on a potential customer that elects not to purchase, expand, or continue to purchase our products.
Attracting, expanding, and retaining sales to large customers involve risks that may not be present, or that are present to a lesser extent, with sales to smaller customers, including: • competition from companies that traditionally target larger enterprises and that may have pre-existing relationships or purchase commitments from such larger enterprise customers, including companies that seek to bundle sales of their new or existing products that are competitive to our products, or that may have more experienced sales personnel or greater budgetary resources available or committed to such larger enterprise customers; • longer evaluation periods, more detailed evaluations, and more cumbersome contract negotiation and approval processes, including potential requirements for such purchasing decisions to be approved by senior executives of such companies; • increased purchasing power and leverage in negotiating pricing terms and other contractual arrangements with us, which may result in us being subject to additional, or greater levels of, contractual risks than our sales to smaller customers; • requirements for more technically complex configurations, integrations, deployments, or features; • greater customer support or assistance with migrating their systems from another vendor to our network and products; • more stringent requirements in terms of the security, performance, and reliability of our products and our network and our support and compliance obligations related to our products; • increased usage of our global network that may require us to incur greater network infrastructure expenditures; and • longer sales cycles and the associated risk that substantial time and resources may be spent on a potential customer that elects not to purchase, expand, or continue to purchase our products.
Our success will depend in part on our ability to manage this growth effectively, which will require that we continue to improve our administrative, operational, financial, and management systems and controls by, among other things: • effectively attracting, training, and integrating a large number of new employees, particularly members of our sales, marketing, engineering, and management teams; • effectively managing a rapidly increasing number of employees in a growing number of countries around the world, particularly in circumstances when employees are working completely remotely; • ensuring the integrity and security of our network and IT infrastructure throughout the world; • maintaining our corporate culture, which we believe fosters innovation, teamwork, and an emphasis on customer-focused results and contributes to our cost-effective business model; • successfully acquiring and integrating companies and assets to improve, expand, and diversify our business and products through strategic acquisitions, investments, and partnerships; • further improving our key business applications, processes, and IT infrastructure, including our network co-location facilities, to support our current and anticipated business needs; • enhancing our information and communication systems to ensure that our employees and offices around the world are well coordinated and can effectively communicate with each other and our growing base of channel partners, customers, and users; • maintaining high levels of customer support; and • appropriately documenting and testing our IT systems and business processes.
Our success will depend in part on our ability to manage this growth effectively, which will require that we continue to improve our administrative, operational, financial, and management systems and controls by, among other things: • effectively attracting, training, and integrating a large number of new employees, particularly members of our sales, marketing, engineering, and management teams; 28 Table of contents • effectively managing a rapidly increasing number of employees in a growing number of countries around the world, particularly in circumstances when employees are working completely remotely; • ensuring the integrity and security of our network and IT infrastructure throughout the world; • maintaining our corporate culture, which we believe fosters innovation, teamwork, and an emphasis on customer-focused results and contributes to our cost-effective business model; • successfully acquiring and integrating companies and assets to improve, expand, and diversify our business and products through strategic acquisitions, investments, and partnerships; • further improving our key business applications, processes, and IT infrastructure, including our network co-location facilities, to support our current and anticipated business needs; • enhancing our information and communication systems to ensure that our employees and offices around the world are well coordinated and can effectively communicate with each other and our growing base of channel partners, customers, and users; • maintaining high levels of customer support; and • appropriately documenting and testing our IT systems and business processes.
While we believe our tax estimates are reasonable and that we have complied with all applicable tax laws, there can be no assurance that a governing tax authority will not have a different interpretation of the law and assess us with additional taxes, including with respect to intercompany transfer pricing.
While we believe our tax estimates are reasonable and that we have complied with all applicable tax laws, there can be no assurance that a governing tax authority will not have a different interpretation of the law and assess us with additional taxes, including with respect to transfer pricing.
In particular, our revenue growth rates may continue to slow or decline in the future and may not be sufficient to achieve and sustain profitability, as we also expect our costs to increase in future periods. We believe that historical comparisons of our revenue may not be meaningful and should not be relied upon as an indication of future performance.
In particular, our revenue growth rates may slow or decline in the future and may not be sufficient to achieve and sustain profitability, as we also expect our costs to increase in future periods. We believe that historical comparisons of our revenue may not be meaningful and should not be relied upon as an indication of future performance.
Zatlyn with the ability to significantly influence the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A common stock and Class B common stock; • our Board of Directors is classified into three classes of directors with staggered three-year terms and directors are only able to be removed from office for cause; • vacancies on our Board of Directors will be able to be filled only by our Board of Directors and not by stockholders; • only the Chair of our Board of Directors, our Chief Executive Officer, or a majority of our entire Board of Directors are authorized to call a special meeting of stockholders; • certain litigation against us can only be brought in Delaware; • our amended and restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established and shares of which may be issued, without the approval of the holders of Class A common stock; • advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders; • our stockholders will only be able to take action at a meeting of stockholders and not by written consent; and • any amendment of the above anti-takeover provisions in our amended and restated certificate of incorporation or amended and restated bylaws will require the approval of two-thirds of the combined vote of our then-outstanding shares of Class A common stock and Class B common stock.
Zatlyn with the ability to significantly influence the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A common stock and Class B common stock; • our Board of Directors is classified into three classes of directors with staggered three-year terms and directors are only able to be removed from office for cause; • vacancies on our Board of Directors will be able to be filled only by our Board of Directors and not by stockholders; • only the Chair of our Board of Directors, our Chief Executive Officer, or a majority of our entire Board of Directors are authorized to call a special meeting of stockholders; • certain litigation against us can only be brought in Delaware; • our amended and restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established and shares of which may be issued, without the approval of the holders of Class A common stock; • advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders; 65 Table of contents • our stockholders will only be able to take action at a meeting of stockholders and not by written consent; and • any amendment of the above anti-takeover provisions in our amended and restated certificate of incorporation or amended and restated bylaws will require the approval of two-thirds of the combined vote of our then-outstanding shares of Class A common stock and Class B common stock.
In addition, upon conversion of the 2026 Notes, unless we elect to deliver solely shares of our Class A common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the 2026 Notes being converted.
In addition, upon conversion of the Notes, unless we elect to deliver solely shares of our Class A common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the Notes being converted.
If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the 2026 Notes or make cash payments upon conversions thereof in accordance with the terms of the 2026 Indenture.
If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the Notes or make cash payments upon conversions thereof in accordance with the terms of the applicable indenture.
In the United States, various federal laws and regulations already apply to the collection, processing, disclosure and security of certain types of data, including the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the Health Insurance Portability and Accountability Act of 1996, and the Gramm-Leach-Bliley Act.
In the United States, various federal laws and regulations apply to the collection, processing, disclosure and security of certain types of data, including the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the Health Insurance Portability and Accountability Act of 1996, and the Gramm-Leach-Bliley Act.
Our ability to make scheduled payments of the principal of, or to refinance our indebtedness, including the 2026 Notes and any borrowings under our Revolving Credit Facility, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control.
Our ability to make scheduled payments of the principal of, or to refinance our indebtedness, including the Notes, and any borrowings under our Revolving Credit Facility, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control.
In addition, as our business grows and we employ more employees and engage more contractors in more countries around the world, our ability to supervise the actions of our employees and contractors will decrease and the risk of an employee or contractor error or act of malfeasance will increase.
As our business grows and we employ more employees and engage more contractors in more countries around the world, our ability to supervise the actions of our employees and contractors will decrease and the risk of an employee or contractor error or act of malfeasance will increase.
If holders of the 2026 Notes elect to convert their 2026 Notes, we may settle our conversion obligation by delivering to them a significant number of shares of our Class A common stock, which would cause dilution to our existing stockholders.
If holders of the Notes elect to convert their Notes, we may settle our conversion obligation by delivering to them a significant number of shares of our Class A common stock, which would cause dilution to our existing stockholders.
Selling our products to the U.S. government, whether directly or through channel partners, also subjects us to certain regulatory and contractual requirements, including expanded compliance obligations under the Federal Acquisition Regulations (FARs).
Selling our products to the U.S. government, whether directly or through channel partners, also subjects us to certain regulatory and contractual requirements, including expanded compliance obligations under the Federal Acquisition Regulations.
Repaying and servicing our existing and future debt, including our 2026 Notes and our Revolving Credit Facility, may require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our indebtedness.
Repaying and servicing our existing and future debt, including our Notes and our Revolving Credit Facility, may require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our indebtedness.
Consequently, any increase or decline in new sales or renewals to these customers in any one period may not be immediately reflected in our revenue for that period. Any such change, however, may affect our revenue in future periods.
Consequently, any increase or decline in new sales or renewals to our customers in any one period may not be immediately reflected in our revenue for that period. Any such change, however, may affect our revenue in future periods.
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, stockholders, officers, or other employees to us or our stockholders; (iii) any action arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; or (iv) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does 64 Table of contents not have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as defendants.
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware is the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, stockholders, officers, or other employees to us or our stockholders; (iii) any action arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; or (iv) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as defendants.
The conversion of some or all of the 2026 Notes would dilute the ownership interests of our existing stockholders to the extent we satisfy our conversion obligation by delivering shares of our Class A common stock upon any conversion of the 2026 Notes.
The conversion of some or all of the Notes would dilute the ownership interests of our existing stockholders to the extent we satisfy our conversion obligation by delivering shares of our Class A common stock upon any conversion of the Notes.
Foreign Corrupt Practices Act of 1977, the UK Bribery Act 2010, and other anti-corruption, anti-bribery, anti-money laundering, and similar laws in the United States and other countries in which we conduct activities.
Foreign Corrupt Practices Act of 1977 (FCPA), the UK Bribery Act 2010, and other anti-corruption, anti-bribery, anti-money laundering, and similar laws in the United States and other countries in which we conduct activities.
However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the 2026 Notes surrendered or 2026 Notes being converted.
However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the Notes surrendered or Notes being converted.
For example, potentially as a result of these various macroeconomic impacts on our customers, we periodically have experienced lengthening of the average sales cycles for certain types of customers and sales, slowdowns in our pipeline of potential new 20 Table of contents customers and in the rate of converting sales pipeline opportunities into new sales, increases in average days sales outstanding, higher levels of churn in our paying customer base (which is when any of our paying customers cease to be a paying customer for any reason, including any pay-as-you-go customer converting to a free subscription plan), and lengthening of the timing of payment from some of our customers, all of which may have contributed to a slowdown in our revenue growth from prior periods (including with respect to new customers).
For example, potentially as a result of these various macroeconomic impacts on our customers, we periodically have experienced lengthening of the average sales cycles for certain types of customers and sales, slowdowns in our pipeline of potential new customers and in the rate of converting sales pipeline opportunities into new sales, increases in average days sales outstanding, higher levels of churn in our paying customer base (which is when any of our paying customers cease to be a paying customer for any reason, including any pay-as-you-go customer converting to a free subscription plan), and lengthening of the timing of payment from some of our customers, all of which may have contributed to a slowdown in our revenue growth from prior periods (including with respect to new customers).
In addition, from time to time, we may enter into certain exchange transactions with respect to the 2026 Notes which may also cause dilution to our existing stockholders.
In addition, from time to time, we may enter into certain exchange transactions with respect to the Notes which may also cause dilution to our existing stockholders.
The conflicts in the Middle East and Ukraine and other areas of geopolitical tension around the world or any worsening or expansion of those conflicts or geopolitical tensions, other geopolitical events such as elections and other governmental changes, and any related challenging macroeconomic conditions globally and in various countries in which we and our customers operate, could decrease the spending of our existing and potential new customers, adversely affect demand for our products, cause one or more of our customers, vendors, and partners to file for bankruptcy protection or go out of business, cause one or more of our customers to fail to renew, terminate, or seek to renegotiate their contracts with us, cause one or more of our suppliers to increase prices as a result of current or potential future tariffs or other factors, affect the ability of our sales team to travel to potential customers, impact expected spending from existing and potential new customers, and negatively impact collections of accounts receivable, all of which could adversely affect our business, results of operations, and financial condition.
Conflicts and geopolitical tension around the world or any worsening or expansion of those conflicts or tensions, other geopolitical events such as elections and other governmental changes, and any related challenging macroeconomic conditions globally and in various countries in which we and our customers operate, could decrease the spending of our existing and potential new customers, adversely affect demand for our products, cause one or more of our customers, vendors, and partners to file for bankruptcy protection or go out of business, cause one or more of our customers to fail to renew, terminate, or seek to renegotiate their contracts with us, cause one or more of our suppliers to increase prices as a result of current or potential future tariffs or other factors, affect the ability of our sales team to travel to potential customers, impact expected spending from existing and potential new customers, and negatively impact collections of accounts receivable, all of which could adversely affect our business, results of operations, and financial condition.
Conversely, our paying customers may convert to lower-cost or free plans or reduce the number of products they purchase from us if they do not see the marginal value in paying for our higher-cost plans or for our specific products, or due to challenging macroeconomic conditions and/or reduced operating budgets, thereby impacting our ability to increase revenue.
Conversely, our paying customers may convert to lower-cost or free plans or reduce the number of products they purchase from us or the amount they use our products if they do not see the marginal value in paying for our higher-cost plans or for our specific products, or due to challenging macroeconomic conditions and/or reduced operating budgets, thereby impacting our ability to increase revenue.
Any disruption or delay or additional costs in the supply of our hardware components may delay the opening of new co-location facilities, limit capacity expansion or replacement of defective or obsolete equipment at existing co-location facilities, cause other constraints on our operations that could damage our customer relationships, or otherwise adversely impact our business, financial condition, or results of operations.
Any disruption or delay or additional costs in the supply of our hardware components may delay the opening of new co-location facilities, limit capacity expansion or replacement of defective or obsolete equipment, cause other constraints on our operations that could damage our customer relationships, or otherwise adversely impact our business, financial condition, or results of operations.
If the software, services, or other technology we rely on become unavailable due to extended outages, the third-party provider disabling our access, expiration or termination of licenses, or because they are otherwise no longer available on commercially reasonable terms, our expenses could increase, and our ability to operate our network, provide our products, and our results of operations could be impaired until equivalent software, technology, or services are obtained or replacements are developed, all of which could adversely affect our business.
If the software, services, or other technology we rely on become unavailable due to extended outages, the third-party provider disabling our access, expiration or termination of licenses, or because they are otherwise no longer available on commercially reasonable terms, our expenses could increase, we could incur reputational harm, and our ability to operate our network, provide our products, and our results of operations could be impaired until equivalent software, technology, or services are obtained or replacements are developed, all of which could adversely affect our business.
Factors that could cause fluctuations in the trading price of our Class A common stock include: • price and volume fluctuations in the overall stock market from time to time; • volatility in the trading prices and trading volumes of technology stocks or high growth companies; • changes in operating performance and stock market valuations of other technology or high growth companies generally, or those in our industry in particular; • sales of shares of our Class A common stock and Class B common stock by us or our stockholders; • issuance of shares of our Class A common stock and Class B common stock, whether in connection with an acquisition, upon conversion of some or all of our outstanding 2026 Notes, or in connection with employee equity awards; • failure of securities analysts to maintain coverage of us, changes in financial estimates or share price targets by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • the financial guidance we may provide to the public, any changes in such guidance, or our failure to meet such guidance; • announcements by us or our competitors of new products, features, or services or any delays in our general release of products we previously announced as being in development or beta testing; • the public’s reaction to our press releases, other public announcements, and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our results of operations or fluctuations in our results of operations; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • investments we may make in equity that is, or may become, publicly held, and volatility we may experience due to changes in the market prices of such equity investments; • litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property or other proprietary rights; • actual or perceived network or data security breaches or other network or data security incidents, including any network or product outages or failures; • announced or completed acquisitions of businesses, products, services, or technologies by us or our competitors; • failures or alleged failures to comply with laws or regulations applicable to our business; • new laws or regulations or new amendments to, or interpretations of, existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations, or principles; • any departure of one of our co-founders from our company or any other significant change in our management; and • general economic conditions and slow or negative growth of our markets, including inflation and related changes in monetary policy, rising interest rates, volatile energy prices, and other impacts of the conflicts in the Middle East and Ukraine, or other areas of geopolitical tension around the world, or any worsening or expansion of those conflicts or geopolitical tensions.
Factors that could cause fluctuations in the trading price of our Class A common stock include: • price and volume fluctuations in the overall stock market from time to time; • volatility in the trading prices and trading volumes of technology stocks or high growth companies; • changes in operating performance and stock market valuations of other technology or high growth companies generally, or those in our industry in particular; • sales of shares of our Class A common stock and Class B common stock by us or our stockholders; • issuance of shares of our Class A common stock and Class B common stock, whether in connection with an acquisition, upon conversion of some or all of our outstanding Notes, or in connection with employee equity awards; • failure of securities analysts to maintain coverage of us, changes in financial estimates or share price targets by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • the financial guidance we may provide to the public, any changes in such guidance, or our failure to meet such guidance; • announcements by us or our competitors of new products, features, or services or any delays in our general release of products we previously announced as being in development or beta testing; • the public’s reaction to our press releases, other public announcements, and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our results of operations or fluctuations in our results of operations; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • investments we may make in equity that is, or may become, publicly held, and volatility we may experience due to changes in the market prices of such equity investments; 63 Table of contents • litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property or other proprietary rights; • actual or perceived network or data security breaches or other network or data security incidents, including any network or product outages or failures; • announced or completed acquisitions of businesses, products, services, or technologies by us or our competitors; • failures or alleged failures to comply with laws or regulations applicable to our business; • new laws or regulations or new amendments to, or interpretations of, existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations, or principles; • any departure of one of our co-founders from our company or any other significant change in our management; and • general economic conditions and slow or negative growth of our markets, including inflation and related changes in monetary policy, changing interest rates, volatile energy prices, and other impacts of conflicts and geopolitical tension around the world, or any worsening or expansion of those conflicts or tensions.
Our broad portfolio of products exposes us to competition from a large number of competitors in a number of different markets, including companies and their product and services offerings in, among others, virtual 25 Table of contents private networks, internal and external firewalls, web security (including web application firewalls and content filtering), distributed denial-of-service (DDoS) prevention, intrusion detection and prevention, application delivery controls, content delivery networks, domain name systems, email security vendors, advanced threat prevention, and wide area network (WAN) technology.
Our broad portfolio of products exposes us to competition from a large number of competitors in a number of different markets, including companies and their product and services offerings in, among others, virtual private networks, internal and external firewalls, web security (including web application firewalls and content filtering), distributed denial-of-service (DDoS) prevention, intrusion detection and prevention, application delivery controls, content delivery networks, domain name systems, email security vendors, advanced threat prevention, and wide area network (WAN) technology.
Should certain of our contracted customers, especially our large customers, terminate their agreements, or reduce their expenditures, with us, our financial condition and results of operations may materially suffer. In addition, as we continue to increase our number of large customers, and the amount of revenue we receive from large customers, this risk may increase.
Should certain of our contracted customers, especially our large customers, terminate their agreements, or reduce their expenditures, with us, our financial condition and results of operations may materially suffer. As we continue to increase our number of large customers, and the amount of revenue we receive from large customers, this risk may increase.
Any failure by us to repay the indebtedness and repurchase the 2026 Notes or make cash payments upon conversions thereof, in each case, when required to do so pursuant to the terms of the 2026 Indenture could harm our business, results of operations, and financial condition.
Any failure by us to repay the indebtedness and repurchase the Notes or make cash payments upon conversions thereof, in each case, when required to do so pursuant to the terms of the applicable indenture could harm our business, results of operations, and financial condition.
For example, our corporate headquarters in the San Francisco Bay Area and one of our core co-location facilities located in the greater Portland, Oregon area have experienced and may continue to experience, climate-related events and at an increasing frequency, including severe storms, floods, drought, water scarcity, heat waves, wildfires and resultant air quality impacts and power shutoffs associated with these types of events.
For example, our corporate headquarters in the San Francisco Bay Area and one of our core co-location facilities located in the greater Portland, Oregon area have experienced and may continue to 70 Table of contents experience, climate-related events and at an increasing frequency, including severe storms, floods, drought, water scarcity, heat waves, wildfires and resultant air quality impacts and power shutoffs associated with these types of events.
The global network that we use to provide our products to our customers is made up of equipment at co-location facilities located in more than 335 cities and over 125 countries worldwide and we expect to continue to increase the size of our network in the future.
The global network that we use to provide our products to our customers is made up of equipment at co-location facilities located in more than 330 cities and over 125 countries worldwide and we expect to continue to increase the size of our network in the future.
Anti-corruption and anti-bribery laws, which have been enforced aggressively and are interpreted broadly, prohibit companies and their employees and agents from promising, authorizing, making, or offering improper payments or other benefits to government officials and others in the public sector.
Anti-corruption and anti-bribery laws, which have in the past been enforced aggressively and interpreted broadly, prohibit companies and their employees and agents from promising, authorizing, making, or offering improper payments or other benefits to government officials and others in the public sector.
If such claims are successful, our business and results of operations could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and results of operations. Item 1B.
If such claims are successful, our business and results of operations could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and results of operations.
Sales to government entities are subject to substantial additional risks that are not present in sales to other customers, including: • selling to government agencies can be more competitive, expensive, and time-consuming than sales to other customers, often requiring significant upfront time and expense without any assurance that such efforts will generate a sale; • increasing numbers of U.S., European, Asian, or other government certification and audit requirements potentially applicable to our network, including FedRAMP in the United States, are often difficult and costly to obtain and maintain, and failure to do so will restrict our ability to sell to government customers in the applicable jurisdictions; • government demand, payment for, and continued usage of, our products may be impacted by public sector budgetary cycles, funding authorizations, or government shutdowns; • governments routinely investigate and audit government contractors’ administrative processes and any unfavorable audit could result in fines, civil or criminal liability, further investigations, damage to our reputation, and debarment, suspension, or ineligibility from some or all further business with the applicable government and its related agencies and departments; • governments often require contract terms that differ from our standard customer arrangements, including terms that can lead to those customers obtaining broader rights in our products than would be expected under a standard commercial contract and terms that can allow for early termination or subject us to more onerous obligations and requirements than our standard customer arrangements, such as supply chain restrictions, restrictions on employees' ability to manage their accounts, and additional reporting obligations; • governments may require us to partner with companies based in the governments’ jurisdictions in order for us to sell any of our products to those governments, which could result in a loss of revenue we otherwise would receive for such sales; • governments may demand better pricing terms and public disclosure of such pricing terms, which may harm our ability to negotiate pricing terms with our non-government customers; and • governments may demand the use of local data centers, labor, or subcontractors which may require significant upfront increase in headcount and other expenses.
Sales to government entities are subject to substantial additional risks that are not present in sales to other customers, including: • selling to government agencies can be more competitive, expensive, and time-consuming than sales to other customers, often requiring significant upfront time and expense without any assurance that such efforts will generate a sale; • increasing numbers of U.S., European, Asian, or other government certification and audit requirements potentially applicable to our network, including FedRAMP in the United States, are often difficult and costly to obtain and maintain, and failure to do so will restrict our ability to sell to government customers in the applicable jurisdictions; • government demand, payment for, and continued usage of, our products may be impacted by public sector budgetary cycles, funding authorizations, government shutdowns, reductions in government headcount and functions, or government contract consolidation and reductions in spending; • governments routinely investigate and audit government contractors’ administrative processes and any unfavorable audit could result in fines, civil or criminal liability, further investigations, damage to our reputation, and debarment, suspension, or ineligibility from some or all further business with the applicable government and its related agencies and departments; • governments often require contract terms that differ from our standard customer arrangements, including terms that can lead to those customers obtaining broader rights in our products than would be expected under a standard commercial contract and terms that can allow for early termination or subject us to more onerous obligations and requirements than our standard customer arrangements, such as supply chain restrictions, restrictions on employees' ability to manage their accounts, and additional reporting obligations; governments may limit public sector contracts to companies headquartered in the governments' respective jurisdictions or require partnerships with companies based in the governments’ respective jurisdictions in order for us to sell any of our products to those governments, which could result in a loss of revenue we otherwise would receive for such sales; • governments may demand better pricing terms and public disclosure of such pricing terms, which may harm our ability to negotiate pricing terms with our non-government customers; and • governments may demand the use of local data centers, labor, or subcontractors which may require significant upfront increase in headcount and other expenses.
Such a failure of a core co-location facility could degrade and slow down our network, reduce the functionality of our products for our customers, result in gaps or loss in customer analytics or functionality with respect to some of our products, impact our ability to bill our customers, result in the loss of customers or reduction in their purchases from us due to dissatisfaction with the reliability of our products and network, and otherwise materially and adversely impact our business, reputation, and results of operations.
Such a failure of a core co-location facility could degrade and slow down our network, reduce the functionality of our products for our 41 Table of contents customers, result in gaps or loss in customer analytics or functionality with respect to some of our products, impact our ability to bill our customers, result in the loss of customers or reduction in their purchases from us due to dissatisfaction with the reliability of our products and network, and otherwise materially and adversely impact our business, reputation, and results of operations.
A substantial majority of our revenue in the year ended December 31, 2024 was from contracted customers that were acquired through our inside and field sales teams, and we expect our sales teams to continue generating the majority of our revenue for the foreseeable future.
A substantial majority of our revenue in the year ended December 31, 2025 was from contracted customers that were acquired through our inside and field sales teams, and we expect our sales teams to continue generating the majority of our revenue for the foreseeable future.
While the June 2019 route leak and the network outages did not have a material impact on our business, results of operations or financial condition, any similar events that may occur in the future may have a material adverse impact on our results of operations or financial condition.
While the June 2019 route leak and the network outages described above did not have a material impact on our business, results of operations or financial condition, any similar events that may occur in the future may have a material adverse impact on our results of operations or financial condition.
These international operations will require significant management attention and financial resources and are subject to substantial risks, including: • geopolitical, economic, and social uncertainties, including the potential nationalization of key peering partners by foreign governments or political unrest that affects our ability to continue to work with particular peering partners, potential terrorist activities, military conflict or war, trade policies and sanctions, and the unknown impact of regional or global health crises, or epidemic or pandemic diseases; • changes in a specific country’s or region’s political or economic conditions, including the impact of elections and other changes in governments; • unexpected costs for the localization of our products, including translation into foreign languages and adaptation for local practices, certifications, and legal and regulatory requirements; • greater difficulty in enforcing contracts and accounts receivable collection, and longer collection periods; • reduced or uncertain protection for intellectual property rights in some countries; • requirements to open local offices or otherwise maintain a local presence in some countries; • greater risk of unexpected changes in regulatory practices, increased costs due to tariffs, and tax laws and treaties; • increased risk to our local employees of government pressure, including potential threats of prosecution or imprisonment, in connection with enforcement of local legal and regulatory requirements; • greater risk of a failure of foreign employees and channel partners to comply with both U.S. and foreign laws, including antitrust regulations, anti-bribery laws, export and import control laws, and any applicable trade regulations ensuring fair trade practices; • heightened security risks associated with our co-location facilities and related equipment in high-risk countries and the software code and systems access shared with our service providers located in such countries, including in the Hong Kong region as a result of the National Security Law passed in June 2020; • greater security and oversight risks associated with third-party contractors that we use to install and maintain our hardware in co-location facilities in foreign countries and the limited background checks and screening that we can perform on such service providers; • laws and regulations related to privacy, data protection, security requirements, data localization, or content restriction that could pose risks to our intellectual property, increase the cost of doing business in a country, subject us to greater risks of claims and enforcement actions by regulators or others, subject us and our current and potential customers to burdensome requirements, increase the chance that current and potential customers may be unable to use our products or may be required to lessen or alter how they use our products, or create other disadvantages to our business or negative impacts on our results of operations; • increased expenses incurred in establishing and maintaining office space and equipment for our international operations; 55 Table of contents • greater difficulty in identifying, attracting, and retaining local qualified personnel and the costs and expenses associated with such activities; • differing employment practices and labor relations issues, which may make expansion or contraction of our workforce, or changes in the terms of employment, in such countries more costly and time-consuming and subject us to a greater risk of disputes or litigation; • increased regulatory requirements and litigation risk related to the presence of our physical infrastructure in countries around the world; • difficulties in managing and staffing international offices and increased travel, infrastructure, and legal compliance costs associated with operating multiple international locations; and • fluctuations in exchange rates between the U.S. dollar and foreign currencies in markets where we do business, particularly the United Kingdom, the European Union, and Singapore where we have large offices or a large number of employees and pay employees in local currency.
These international operations will require significant management attention and financial resources and are subject to substantial risks, including: • geopolitical, economic, and social uncertainties, including the potential implementation of tariffs or other costs or restrictions on the conduct of business, potential nationalization of key peering partners by foreign governments or political unrest that affects our ability to continue to work with particular peering partners, potential terrorist activities, military conflict or war, trade policies and sanctions, and the unknown impact of regional or global health crises, or epidemic or pandemic diseases; • changes in a specific country’s or region’s political or economic conditions, including the impact of elections and other changes in governments; • unexpected costs for the localization of our products, including translation into foreign languages and adaptation for local practices, certifications, and legal and regulatory requirements; • greater difficulty in enforcing contracts and accounts receivable collection, and longer collection periods; • reduced or uncertain protection for intellectual property rights in some countries; • requirements to open local offices or otherwise maintain a local presence in some countries; • greater risk of unexpected changes in regulatory practices, and tax laws and treaties; • increased risk to our local employees of government pressure, including potential threats of prosecution or imprisonment, in connection with enforcement of local legal and regulatory requirements; • greater risk of a failure of foreign employees and channel partners to comply with both U.S. and foreign laws, including antitrust regulations, anti-bribery laws, export and import control laws, and any applicable trade regulations ensuring fair trade practices; • heightened security risks associated with our co-location facilities and related equipment in high-risk countries and the software code and systems access shared with our service providers located in such countries; 56 Table of contents • greater security and oversight risks associated with third-party contractors that we use to install and maintain our hardware in co-location facilities in foreign countries and the limited background checks and screening that we can perform on such service providers; • laws and regulations related to privacy, AI, data protection, security requirements, data localization, or content restriction that could pose risks to our intellectual property, increase the cost of doing business in a country, subject us to greater risks of claims and enforcement actions by regulators or others, subject us and our current and potential customers to burdensome requirements, increase the chance that current and potential customers may be unable to use our products or may be required to lessen or alter how they use our products, or create other disadvantages to our business or negative impacts on our results of operations; • increased expenses incurred in establishing and maintaining office space and equipment for our international operations; • greater difficulty in identifying, attracting, and retaining local qualified personnel and the costs and expenses associated with such activities; • differing employment practices and labor relations issues, which may make expansion or contraction of our workforce, or changes in the terms of employment, in such countries more costly and time-consuming and subject us to a greater risk of disputes or litigation; • increased regulatory requirements and litigation risk related to the presence of our physical infrastructure in countries around the world; • difficulties in managing and staffing international offices and increased travel, infrastructure, and legal compliance costs associated with operating multiple international locations; and • fluctuations in exchange rates between the U.S. dollar and foreign currencies in markets where we do business, particularly the United Kingdom, the European Union, and Singapore where we have large offices or a large number of employees and pay employees in local currency.
Actual or perceived problems with our network or systems, or those of our vendors, contractors, or those with which we have strategic relationships, could result in actual or perceived breaches of our or our customers’ networks and systems or data and/or subject us to reputational or financial harm.
Actual or perceived problems with our network or systems, or those of our vendors, contractors, or those with which we have strategic relationships, could result in actual or perceived breaches of, or incidents affecting, our or our customers’ networks and systems or data and/or subject us to reputational or financial harm.
Further, any significant change to applicable laws, regulations, or industry practices regarding the collection, use, retention, security, disclosure, or other processing of users’ content, or regarding the manner in which the express or implied consent of users for the collection, use, retention, disclosure, or other processing of such content is obtained, could increase our costs and require us to modify our network, products, and features, possibly in a material manner, which we may be unable to complete, and may limit our ability to store and process customer data or develop new products and features.
Further, any significant change to applicable laws, regulations, or industry practices regarding privacy, AI, data protection, information security, and the collection, use, retention, security, disclosure, or other processing of users’ content, or regarding the manner in which the express or implied consent of users for the collection, use, retention, disclosure, or other processing of such content is obtained, could increase our costs and require us to modify our network, products, and features, possibly in a material manner, which we may be unable to complete, and may limit our ability to store and process customer data or develop new products and features.
While we immediately began investigating the intrusion and believe we cut off the threat actor’s access 37 Table of contents prior to significant impact on our customer data or systems, we expect we will continue to be subject to similar threats of unauthorized access in the future and we may not be as successful in quickly identifying such intrusions and mitigating the impacts of such intrusions.
While we immediately began investigating the intrusion and believe we cut off the threat actor’s access prior to significant impact on our customer data or systems, we expect we will continue to be subject to similar threats of unauthorized access in the future and we may not be as successful in quickly identifying such intrusions and mitigating the impacts of such intrusions.
If the exemptive order were revoked or we are unable otherwise to rely on the exemptive order or another applicable exemption, we may be required to institute 54 Table of contents burdensome requirements to comply with the 1940 Act, which may restrict our activities in a way that could adversely affect our business, results of operations, and financial condition.
If the exemptive order were revoked or we are unable otherwise to rely on the exemptive order or another applicable exemption, we may be required to institute burdensome requirements to comply with the 1940 Act, which may restrict our activities in a way that could adversely affect our business, results of operations, and financial condition.
Specifically, we identified that our products were used by, or for the benefit of, certain individuals and entities included in OFAC’s Specially Designated Nationals and Blocked Persons List, including entities identified in OFAC’s counter-terrorism and counter-narcotics trafficking sanctions programs and individuals or entities affiliated with governments currently subject to comprehensive U.S. sanctions or located in regions subject to comprehensive sanctions.
Specifically, we identified that our products were used by, or for the benefit of, certain individuals and entities included in OFAC’s Specially Designated Nationals and Blocked Persons List, including entities identified in 59 Table of contents OFAC’s counter-terrorism and counter-narcotics trafficking sanctions programs and individuals or entities affiliated with governments currently subject to comprehensive U.S. sanctions or located in regions subject to comprehensive sanctions.
However, identifying these types of strategic partners, negotiating and documenting our 31 Table of contents business and contractual relationships with them, maintaining application programming interfaces (APIs) that some of our strategic partners use to interact with our business, and monitoring the actions of our channel partners and their relationships with our end customers, each require significant time and resources and could negatively impact the timing of sales that involve our partners.
However, identifying these types of strategic partners, negotiating and documenting our business and contractual relationships with them, maintaining application programming interfaces (APIs) that some of our strategic partners use to interact with our business, and monitoring the actions of our channel partners and their relationships with our end customers, each require significant time and resources and could negatively impact the timing of sales that involve our partners.
Given the trillions of Internet requests that route through our network on a monthly basis and the large array of Internet properties (e.g., domains, 39 Table of contents websites, APIs, and mobile applications) we service, the impact of any such error, failure, vulnerability, or bug can be large in terms of absolute numbers of affected requests and customers.
Given the trillions of Internet requests that route through our network on a monthly basis and the large array of Internet properties (e.g., domains, websites, APIs, and mobile applications) we service, the impact of any such error, failure, vulnerability, or bug can be large in terms of absolute numbers of affected requests and customers.
Further, we anticipate needing to identify different transfer mechanisms and/or change our use of certain standard contractual clauses in order to lawfully transfer certain personal data from those regions to the United States.
In addition, we anticipate needing to identify different transfer mechanisms and/or change our use of certain standard contractual clauses in order to lawfully transfer certain personal data from those regions to the United States.
We cannot specify with any certainty the particular uses of the net proceeds that we received from our prior financing activities, including from the issuances of the 2025 Notes and the 2026 Notes, and our management has broad discretion in the application of the net proceeds.
We cannot specify with any certainty the particular uses of the net proceeds that we received from our prior financing activities, including from the issuances of the Notes, and our management has broad discretion in the application of the net proceeds.
We rely on third-party software to provide many essential financial and operational services to support our business. Some of these vendors are less established and have shorter operating histories than traditional software vendors. 33 Table of contents Moreover, these vendors provide their services to us via a cloud-based model instead of software that is installed on our premises.
We rely on third-party software to provide many essential financial and operational services to support our business. Some of these vendors are less established and have shorter operating histories than traditional software vendors. Moreover, these vendors provide their services to us via a cloud-based model instead of software that is installed on our premises.
For example, in November 2023, our control plane and analytics 40 Table of contents services experienced an outage triggered by a power failure at one of our core data centers in the greater Portland, Oregon area, which impacted certain customers' access to some of our products and services for several days and the loss of certain customer logs.
For example, in November 2023, our control plane and analytics services experienced an outage triggered by a power failure at one of our core data centers in the greater Portland, Oregon area, which impacted certain customers' access to some of our products and services for several days and the loss of certain customer logs.
As we continue to expand our international operations, we may become more exposed to foreign currency risk or remeasurement risk. 56 Table of contents In the second quarter of 2024, we initiated a foreign exchange hedging program that uses derivative instruments to lessen the effects of currency fluctuations on certain of our non-U.S. dollar denominated currency exposures.
As we continue to expand our international operations, we may become more exposed to foreign currency risk or remeasurement risk. In the second quarter of 2024, we initiated a foreign exchange hedging program that uses derivative instruments to lessen the effects of currency fluctuations on certain of our non-U.S. dollar denominated currency exposures.
Our Class A common stock is listed on the NYSE under the symbol “NET.” However, we cannot assure you of the likelihood that an active trading market for our Class A common stock will be maintained, the liquidity of any trading market, your ability to sell your shares of our Class A common stock when desired, or the prices that you may obtain for your shares.
Our Class A common stock is listed on the NYSE under the symbol “NET.” However, we cannot assure you of the likelihood that an active trading market for our Class A common stock will be maintained, the liquidity of any trading 66 Table of contents market, your ability to sell your shares of our Class A common stock when desired, or the prices that you may obtain for your shares.
The conflicts in the Middle East and Ukraine and other areas of geopolitical tension around the world or any worsening or expansion of those conflicts or tensions, other geopolitical events such as elections and other governmental changes, and any related challenging macroeconomic conditions globally and in various countries in which we and our customers operate may materially adversely affect our customers, vendors, and partners, and the duration and extent to which these factors may impact our future business and operations, results of operations, financial condition, and cash flows remain uncertain.
Conflicts and geopolitical tension around the world or any worsening or expansion of those conflicts or tensions, other geopolitical events such as elections and other governmental changes, and any related challenging macroeconomic conditions globally and in various countries in which we and our customers operate may materially adversely affect our customers, vendors, and partners, and the duration and extent to which these factors may impact our future business and operations, results of operations, financial condition, and cash flows remain uncertain.
If we fail to successfully integrate our acquisitions, or integrate and retain the people, technologies or customers associated with those acquisitions, into our company, the results of operations of the combined company could be adversely affected.
If we fail to successfully integrate our acquisitions, or integrate and retain the people, technologies, business partners, or customers associated with those acquisitions, into our company, the results of operations of the combined company could be adversely affected.
This could result in substantial costs, require changes to our policies and business practices, require us to engage in additional contractual obligations, limit our ability to provide certain products in certain jurisdictions, or materially adversely affect our business and operating results. We are exposed to fluctuations in currency exchange rates, which could negatively affect our results of operations.
This could result in substantial costs, require changes to our policies and business practices, require us to engage in additional contractual obligations, limit our ability to provide certain products in certain jurisdictions, or materially adversely affect our business and operating results. 57 Table of contents We are exposed to fluctuations in currency exchange rates, which could negatively affect our results of operations.
We could incur greater operating expenses and our customer acquisition and retention could be negatively impacted if other network operators: • implement usage-based pricing; • discount pricing for competitive products; • otherwise materially change their pricing rates or schemes; • charge us to deliver our traffic at certain levels or at all; • throttle traffic based on its source or type; • implement bandwidth caps or other usage restrictions; or • otherwise try to monetize or control access to their networks.
We could incur greater 49 Table of contents operating expenses and our customer acquisition and retention could be negatively impacted if other network operators: • implement usage-based pricing; • discount pricing for competitive products; • otherwise materially change their pricing rates or schemes; • charge us to deliver our traffic at certain levels or at all; • throttle traffic based on its source or type; • implement bandwidth caps or other usage restrictions; or • otherwise try to monetize or control access to their networks.
Potential large customers often view the subscription to our products, including any expansion of those subscriptions, as a significant strategic decision and, as a result, in some cases require considerable time to evaluate, test, and qualify our network and products prior to entering into or expanding a relationship with us.
Potential large customers often view the subscription to our products, including any expansion of those subscriptions, as a significant strategic decision and, as a result, in some cases require considerable time to 24 Table of contents evaluate, test, and qualify our network and products prior to entering into or expanding a relationship with us.
We rely on our leadership team in the areas of operations, security, marketing, sales, support, research and development, and general and administrative functions, and on individual contributors on our research and development team. Although we have entered into employment offer letters with our key personnel, these 29 Table of contents agreements have no specific duration and constitute at-will employment.
We rely on our leadership team in the areas of operations, security, marketing, sales, support, research and development, and general and administrative functions, and on individual contributors on our research and development team. Although we have entered into employment offer letters with our key personnel, these agreements have no specific duration and constitute at-will employment.
We have limited experience with respect to determining the optimal prices and pricing models for some of our newer subscription plans and products, as well as our bundled sales of products and solutions and our professional services to assist some of our large customers in their migration from existing vendors and otherwise with the configuration and use of our products.
We have limited experience with respect to determining the optimal prices and pricing models for some of our newer subscription plans and products, as well as our bundled sales of products and 31 Table of contents solutions and our professional services to assist some of our large customers in their migration from existing vendors and otherwise with the configuration and use of our products.
We also frequently provide significant incentives for key employees of acquired companies to remain as our employees after the completion of the acquisition in order to facilitate integration and allow us to achieve the benefits we expect from the acquisition, but these incentives may not prove to be successful 35 Table of contents in retaining those new key employees.
We also frequently provide significant incentives for key employees of acquired companies to remain as our employees after the completion of the acquisition in order to facilitate integration and allow us to achieve the benefits we expect from the acquisition, but these incentives may not prove to be successful in retaining those new key employees.
Consistent with the original agreement, our current agreement with JD Cloud is subject to earlier termination by either party under certain circumstances such as the other party’s material breach and can be terminated by JD Cloud under certain circumstances if necessary Chinese governmental approvals are revoked or become limited or impaired or if public law or regulatory action by the Chinese or U.S. government expressly prohibits or materially restricts the collaboration contemplated by the agreement.
Consistent with the original agreement, our current agreement with JD Cloud is subject to earlier termination by either party under certain circumstances such as the other party’s material breach and can be terminated by JD Cloud under certain 58 Table of contents circumstances if necessary Chinese governmental approvals are revoked or become limited or impaired or if public law or regulatory action by the Chinese or U.S. government expressly prohibits or materially restricts the collaboration contemplated by the agreement.
Our failure to repurchase the 2026 Notes at a time when the repurchase is required by the 2026 Indenture or to pay any cash payable on future conversions of the 2026 Notes as required by the 2026 Indenture would constitute a default.
Our failure to repurchase the Notes at a time when the repurchase is required by the applicable indenture or to pay any cash payable on future conversions of the Notes as required by the applicable indenture would constitute a default.
If we are ultimately unable to achieve or improve profitability at the level or during the time frame anticipated by industry or financial analysts and our stockholders, our stock price may decline. 30 Table of contents If we are not able to maintain and promote our brand, our business and results of operations may be adversely affected.
If we are ultimately unable to achieve or improve profitability at the level or during the time frame anticipated by industry or financial analysts and our stockholders, our stock price may decline. If we are not able to maintain and promote our brand, our business and results of operations may be adversely affected.
Our business depends, in part, on sales to the United States and foreign government organizations, which are subject to a number of challenges and risks. 32 Table of contents We derive a portion of our revenue from contracts with government organizations, and we believe the success and growth of our business will in part depend on adding additional public sector customers.
Our business depends, in part, on sales to the United States and foreign government organizations, which are subject to a number of challenges and risks. We derive a portion of our revenue from contracts with government organizations, and we believe the success and growth of our business will in part depend on adding additional public sector customers.
Even if an alternative solution is identified, we cannot be certain that the 57 Table of contents economic terms or performance of any such alternative arrangement will be comparable to our existing relationship with JD Cloud, which could materially negatively impact our financial results and customer satisfaction with such alternative arrangement.
Even if an alternative solution is identified, we cannot be certain that the economic terms or performance of any such alternative arrangement will be comparable to our existing relationship with JD Cloud, which could materially negatively impact our financial results and customer satisfaction with such alternative arrangement.
We have invested, and expect to continue to invest, substantial resources to increase our brand awareness, both generally and in specific geographies and to specific customer groups. There can be no assurance that our brand development strategies and investment of resources will enhance recognition of our brand or lead to an increased customer base.
We have invested, and expect to continue to invest, substantial resources to increase our brand awareness, both generally and in specific geographies and to specific customer groups. There can be no assurance 22 Table of contents that our brand development strategies and investment of resources will enhance recognition of our brand or lead to an increased customer base.
In addition, we must comply with laws and regulations relating to the formation, administration, and performance of contracts with the public sector, including U.S. federal, state, and local governmental organizations, as well as foreign governmental organizations, which affect how we and our channel partners do business with governmental agencies.
In addition, we must comply with laws and regulations relating to the formation, administration, and performance of contracts with the public sector, including U.S. federal, state, and local governmental organizations, as well as 33 Table of contents foreign governmental organizations, which affect how we and our channel partners do business with governmental agencies.
Our ability to refinance any future indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
Our ability to refinance any future indebtedness will depend on the capital markets and our financial condition at such time. We 67 Table of contents may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
Any of the negative impacts of the conflicts in the Middle East and Ukraine and other areas of geopolitical tension around the world or any worsening or expansion of those conflicts or geopolitical tensions, other geopolitical events such as elections and other governmental changes, and any related challenging macroeconomic conditions globally and in various countries in which we and our customers operate, may have a material adverse effect on our business and operations, results of operations, financial condition, and cash flows.
Any of the negative impacts of conflicts and geopolitical tension around the world or any worsening or expansion of those conflicts or tensions, other geopolitical events such as elections and other governmental changes, and any related challenging macroeconomic conditions globally and in various countries in which we and our customers operate, may have a material adverse effect on our business and operations, results of operations, financial condition, and cash flows.
Actual or perceived noncompliance with applicable regulations or requirements could subject us to: • investigations, enforcement actions, and sanctions; • mandatory changes to our network and products; • disgorgement of profits, fines, and damages; • civil and criminal penalties or injunctions; • claims for damages by our customers or channel partners; • termination of contracts; • loss of intellectual property rights; and • temporary or permanent debarment from sales to government organizations.
Actual or perceived noncompliance with applicable regulations or requirements could subject us to: • investigations, enforcement actions, and sanctions; 50 Table of contents • mandatory changes to our network and products; • disgorgement of profits, fines, and damages; • civil and criminal penalties or injunctions; • claims for damages by our customers or channel partners; • substantial changes to, or termination of, contracts; • loss of intellectual property rights; and • temporary or permanent debarment from sales to government organizations.
In addition, our ability to repurchase the 2026 Notes or to pay cash upon conversions of the 2026 Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness.
In addition, our ability to repurchase the Notes or to pay cash upon conversions of such Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness.
Any 28 Table of contents failure to preserve our culture also could further harm our ability to retain and recruit personnel, innovate and create new products, operate effectively, and execute on our business strategy. Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.
Any failure to preserve our culture also could further harm our ability to retain and recruit personnel, innovate and create new products, operate effectively, and execute on our business strategy. Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.
The failure by our management to apply these proceeds 63 Table of contents effectively could adversely affect our business, results of operations, and financial condition. Pending their use, we may invest our proceeds in a manner that does not produce income or that loses value.
The failure by our management to apply these proceeds effectively could adversely affect our business, results of operations, and financial condition. Pending their use, we may invest our proceeds in a manner that does not produce income or that loses value.
Other factors, many of which are out of our control, may now or in the future impact our ability to add new paying and free customers, including: • potential customers’ commitments to existing equipment or vendors; • potential customers’ greater familiarity and/or comfort with on-premises, appliance-based products and concerns about potential risks associated with using cloud-based solutions; 21 Table of contents • actual or perceived switching costs; • our failure to develop new products and features, and to adapt to technological developments, that our potential customers' demand, including potential large customers; • the failure of our new or existing products and features to perform in the manner demanded or expected by potential customers and our existing customers, particularly large customers; • delays in the general availability release of products and features after we have announced their development or beta availability; • our failure to generate demand for our products through effective marketing efforts related to our business and products; • our failure to obtain additional, or maintain existing, government or industry security certifications for our network and products, such as Federal Risk and Authorization Management Program (FedRAMP) moderate authorization that we achieved in 2022; • negative media, industry, or financial analyst commentary regarding our products and our network and the identities and activities of some of our paying and free customers; • the adoption of new, or amendment of existing, laws, rules, or regulations that negatively impact the utility of, or increase the risk of using, cloud-based solutions generally or our network and products specifically, including changes in new or modified laws and regulations relating to privacy, data protection, and information security; • our failure to effectively recruit, expand, develop, retain, and motivate our sales and marketing personnel; • our failure to develop or expand relationships with existing channel partners or to attract new channel partners; • our failure to help or provide support to our customers, particularly large customers, in order to successfully deploy and use our products in a manner required by them, their industry, or applicable regulators; • our failure to educate our customers about our network and products; • the perceived risk, commencement, or outcome of litigation; • deteriorating general economic conditions, including inflation, rising interest rates, and the actual or perceived failure or financial difficulties of financial institutions; and • impacts of the conflicts in the Middle East and Ukraine and other areas of geopolitical tension around the world or any worsening or expansion of those conflicts or geopolitical tensions and impacts of geopolitical events such as elections and other governmental changes.
Other factors, many of which are out of our control, may now or in the future impact our ability to add new paying and free customers, including: • potential customers’ commitments to existing equipment or vendors; • potential customers’ greater familiarity and/or comfort with on-premises, appliance-based products and concerns about potential risks associated with using cloud-based solutions; • actual or perceived switching costs; • the potential implementation of tariffs or retaliatory measures due to tariffs on the sales of our products in countries where our potential paying customers are located; • our failure to develop new products and features, and to adapt to technological developments, that our potential customers' demand, including potential large customers; • the failure of our new or existing products and features to perform in the manner demanded or expected by potential customers and our existing customers, particularly large customers; • delays in the general availability release of products and features after we have announced their development or beta availability; • our failure to generate demand for our products through effective marketing efforts related to our business and products; • our failure to obtain additional, or maintain existing, government or industry security certifications for our network and products, such as Federal Risk and Authorization Management Program (FedRAMP) moderate authorization that we achieved in 2022; • negative media, industry, or financial analyst commentary regarding our products and our network and the identities and activities of some of our paying and free customers; • the adoption of new, or amendment of existing, laws, rules, or regulations that negatively impact the utility of, or increase the risk of using, cloud-based solutions generally or our network and products specifically, including changes in new or modified laws and regulations relating to privacy, data protection, and information security; • our failure to effectively recruit, expand, develop, retain, and motivate our sales and marketing personnel; • our failure to develop or expand relationships with existing channel partners or to attract new channel partners; • our failure to help or provide support to our customers, particularly large customers, in order to successfully deploy and use our products in a manner required by them, their industry, or applicable regulators; • our failure to educate our customers about our network and products; • the perceived risk, commencement, or outcome of litigation; • deteriorating general economic conditions, including inflation, rising interest rates, and the actual or perceived failure or financial difficulties of financial institutions; and • impacts of conflicts and geopolitical tension around the world or any worsening or expansion of those conflicts or tensions and impacts of geopolitical events such as elections and other governmental changes.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThis oversight and review of our risks from cybersecurity threats includes, among other things, our SVP, Chief Security Officer (CSO) providing regular quarterly briefings to our Board of Directors regarding cybersecurity threats, processes for preventing and/or addressing current threats, ongoing cybersecurity initiatives and strategy and regulatory compliance; our internal audit team reporting on a quarterly basis to the audit committee regarding cybersecurity and other enterprise risk management efforts and related audits and management action plans to mitigate risks by internal audits; and periodic other updates to our Board of Directors by our CEO and CSO in the event of specific critical cybersecurity threats.
Biggest changeThis oversight and review of our risks from cybersecurity threats includes, among other things, our SVP, Chief Security Officer (CSO) providing regular quarterly briefings to our Board of Directors regarding cybersecurity threats, processes for preventing and/or addressing current threats, ongoing cybersecurity initiatives and strategy and regulatory compliance; our internal audit team reporting on a quarterly basis to the audit committee regarding cybersecurity and other enterprise risk management efforts and related audits and management action plans to mitigate risks by internal audits; and 72 Table of contents periodic other updates to our Board of Directors by our CEO and CSO in the event of specific critical cybersecurity threats.
As of the date of the filing of this Annual Report on Form 10-K, we do not believe these risks from cybersecurity threats, including the results of prior cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, but there can be no guarantee that we will not experience such a security breach 70 Table of contents or incident in the future.
As of the date of the filing of this Annual Report on Form 10-K, we do not believe these risks from cybersecurity threats, including the results of prior cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, but there can be no guarantee that we will not experience such a security breach or incident in the future.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn addition, we lease approximately 45,000 square feet at 634 Second Street pursuant to a lease agreement expiring in December 2027. We also maintain offices around the world including Austin, Texas; London, United Kingdom; Lisbon, Portugal; and Singapore to support our global team. We lease all of our facilities and do not own any real property.
Biggest changeIn addition, we lease approximately 45,000 square feet at 634 Second Street pursuant to a lease agreement expiring in December 2027. We also maintain a number of other offices around the world, including Austin, Texas; New York, New York; London, United Kingdom; Lisbon, Portugal; and Singapore, to support our global team.
Item 2. Properties Our corporate headquarters is located in San Francisco, California, where we lease approximately 112,000 square feet. Of the total leased space in San Francisco, approximately 67,000 square feet is concentrated in our adjoining buildings located at 101 Townsend Street and 111 Townsend Street pursuant to lease agreements expiring in 71 Table of contents October 2027.
Item 2. Properties Our corporate headquarters is located in San Francisco, California, where we lease approximately 112,000 square feet. Of the total leased space in San Francisco, approximately 67,000 square feet is concentrated in our adjoining buildings located at 101 Townsend Street and 111 Townsend Street pursuant to lease agreements expiring in October 2027.
We believe that our facilities are suitable to meet our current needs. We intend to expand our facilities or add new facilities as we add employees and enter new geographic markets, and we believe that suitable additional or alternative space will be available as needed to accommodate any such growth.
We intend to expand our facilities or add new facilities as we add employees and enter new geographic markets, and we believe that suitable additional or alternative space will be available as needed to accommodate any such growth.
Added
We lease all of our facilities and do not own any real property. We believe that our facilities are suitable to meet our current needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 4. Mine Safety Disclosures Not applicable. 72 Table of contents PART II
Biggest changeItem 4. Mine Safety Disclosures Not applicable. 73 Table of contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe comparisons are based on historical data and are not indicative of, nor intended to forecast, future performance of our Class A common stock. 73 Table of contents Company/Index Base Period 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Cloudflare $ 100.00 $ 445.43 $ 770.81 $ 265.01 $ 488.04 $ 631.18 S&P 500 Index 100.00 116.26 147.52 118.84 147.64 182.05 S&P 500 Information Technology Index 100.00 142.21 189.64 134.82 210.85 286.10 Unregistered Sales of Equity Securities None.
Biggest changeThe comparisons are based on historical data and are not indicative of, nor intended to forecast, future performance of our Class A common stock. 74 Table of contents Company/Index Base Period 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 Cloudflare $ 100.00 $ 173.05 $ 59.49 $ 109.57 $ 141.70 $ 259.44 S&P 500 Index 100.00 126.89 102.22 126.99 156.59 182.25 S&P 500 Information Technology Index 100.00 133.35 94.80 148.26 201.18 248.07 Unregistered Sales of Equity Securities None.
The following graph compares (i) the cumulative total stockholder return on our Class A common stock from December 31, 2019 through December 31, 2024 with (ii) the cumulative total return of the Standard & Poor's 500 Index and Standard & Poor's Information Technology Index over the same period, assuming the investment of $100 in our Class A common stock and the reinvestment of dividends.
The following graph compares (i) the cumulative total stockholder return on our Class A common stock from December 31, 2020 through December 31, 2025 with (ii) the cumulative total return of the Standard & Poor's 500 Index and Standard & Poor's Information Technology Index over the same period, assuming the investment of $100 in our Class A common stock and the reinvestment of dividends.
Issuer Purchases of Equity Securities None. Item 6. [Reserved] 74 Table of contents
Issuer Purchases of Equity Securities None. Item 6. [Reserved] 75 Table of contents
Holders of Record As of February 6, 2025, we had 51 holders of record of our Class A common stock and 93 holders of record of our Class B common stock.
Holders of Record As of February 12, 2026, we had 45 holders of record of our Class A common stock and 76 holders of record of our Class B common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

75 edited+21 added−13 removed93 unchanged
Biggest changeNet cash used in financing activities of $192.2 million during the year ended December 31, 2023 was primarily due to $207.6 million of repayments of the 2025 Notes, $10.5 million of payments of indemnity holdback, and $8.0 million payment of tax withholding on RSU settlements, which were partially offset by $19.1 million proceeds from the issuance of Class A common stock pursuant to the ESPP and $14.9 million of proceeds from the exercise of vested and unvested stock options.
Biggest changeFinancing Activities 91 Table of contents Net cash provided by financing activities of $2,003.7 million during the year ended December 31, 2025 was primarily due to $2,000.0 million gross proceeds from the issuance of the 2030 Notes, $309.6 million proceeds from the settlement of the 2025 Capped Calls, $33.1 million of proceeds from the exercise of vested stock options, and $25.4 million proceeds from the issuance of Class A common stock pursuant to the 2019 Employee Stock Purchase Plan (ESPP), which were partially offset by $283.4 million from the purchases of capped calls related to the 2030 Notes (the 2030 Capped Calls), $48.3 million payment of tax withholding on Restricted Stock Unit (RSU) and Performance Stock Unit (PSU) settlements, $29.0 million cash paid for issuance costs related to the 2030 Notes, and $3.8 million of payments of indemnity holdback.
Investing Activities Net cash used in investing activities during the year ended December 31, 2024 of $330.2 million resulted primarily from the purchases of available-for-sale securities of $1,572.1 million, capital expenditures of $185.0 million, cash paid for asset acquisitions and business combinations, net of cash acquired of $38.0 million, and capitalization of internal-use software development costs of $28.5 million, which were partially offset by maturities of available-for-sale securities of $1,493.4 million.
Net cash used in investing activities during the year ended December 31, 2024 of $330.2 million resulted primarily from the purchases of available-for-sale securities of $1,572.1 million, capital expenditures of $185.0 million, cash paid for asset acquisitions and business combinations, net of cash acquired of $38.0 million, and capitalization of internal-use software development costs of $28.5 million, which were partially offset by the maturities of available-for-sale securities of $1,493.4 million.
Usage-based consideration is primarily related to fees charged for our customer’s use of excess bandwidth when accessing our network in a given period and is recognized as revenue in the period in which the usage occurs. The subscription and support term contracts for the Company’s contracted customers, typically range from one to three years.
Usage-based consideration is primarily related to fees charged for our customer’s use of excess bandwidth when accessing our network in a given period and is recognized as revenue in the period in which the usage occurs. The subscription and support term contracts for our contracted customers typically range from one to three years.
To calculate dollar-based net retention for a quarter, we compare the Annualized Revenue from paying customers four quarters prior to the Annualized Revenue from the same set of customers in the most recent quarter. Our dollar-based net retention includes expansion and is net of contraction and attrition, but excludes Annualized Revenue from new customers in the current period.
To calculate dollar-based net retention rate for a quarter, we compare the Annualized Revenue from paying customers four quarters prior to the Annualized Revenue from the same set of customers in the most recent quarter. Our dollar-based net retention rate includes expansion and is net of contraction and attrition, but excludes Annualized Revenue from new customers in the current period.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 are not included in this Form 10-K, and such disclosure can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which information is incorporated herein by reference.
Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 are not included in this Form 10-K, and such disclosure can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which information is incorporated herein by reference.
Potentially as a result of these various macroeconomic impacts on our customers, we periodically have experienced lengthening of the average sales cycle for certain types of customers and sales (including sales to new customers and expansion sales to existing customers), slowdowns in our pipeline of potential new customers and in the rate of converting sales pipeline opportunities into new sales, increases in average days sales outstanding, higher levels of churn in our paying customer base (which is when any of our paying customers cease to be a paying customer for any reason, including any pay-as-you-go customer converting to a free subscription plan), and lengthening of the timing of payment from some of our customers, all of which may have contributed to a slowdown in our revenue growth from prior periods (including with respect to new customers).
Potentially as a result of these various macroeconomic impacts on our customers, we periodically have experienced lengthening of the average sales cycle for certain types of customers and sales (including sales to new customers and expansion sales to existing customers), slowdowns in our pipeline of potential new customers and in the rate of converting sales pipeline opportunities into new sales, increases in average days sales outstanding, higher levels of churn in our paying customer base (which is when any of our paying customers cease to be a paying customer for any reason, including 78 Table of contents any pay-as-you-go customer converting to a free subscription plan), and lengthening of the timing of payment from some of our customers, all of which may have contributed to a slowdown in our revenue growth from prior periods (including with respect to new customers).
As of December 31, 2024, our material cash requirements include contractual obligations from the 2026 Notes, purchase commitments and lease obligations. Refer to Notes 6, 7, and 8 to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for more information regarding these material cash requirements.
As of December 31, 2025, our material cash requirements include contractual obligations from the 2026 Notes, purchase commitments and lease obligations. Refer to Notes 6, 7, and 8 to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for more information regarding these material cash requirements.
Such estimates include, but are not limited to, allowance for doubtful accounts, deferred contract acquisitions costs, the period of benefit generated from the deferred contract acquisition costs, the capitalization and estimated useful life of internal-use software, valuation of acquired intangible assets, the assessment of recoverability of intangible assets and their estimated useful lives, useful lives of property and equipment, the determination of the incremental borrowing rate used for operating lease 91 Table of contents liabilities, the valuation and recognition of stock-based compensation awards, uncertain tax positions, and the recognition and measurement of current and deferred income tax assets and liabilities.
Such estimates include, but are not limited to, allowance for doubtful accounts, deferred contract acquisitions costs, the period of benefit generated from the deferred contract acquisition costs, the capitalization and estimated useful life of internal-use software, valuation of acquired intangible assets, the assessment of recoverability of intangible assets and their estimated useful lives, useful lives of property and equipment, the determination of the incremental borrowing rate used for operating lease liabilities, the valuation and recognition of stock-based compensation awards, the assessment of uncertain tax positions, and the recognition and measurement of current and deferred income tax assets and liabilities.
For pay-as-you-go or contracted customers who need a scalable Zero 75 Table of contents Trust security solution to secure users and internal resources using our Zero Trust and network services solutions, we make these products available on a per seat basis.
For pay-as-you-go or contracted customers who need a scalable Zero 76 Table of contents Trust security solution to secure users and internal resources using our Zero Trust and network services solutions, we make these products available on a per seat basis.
Off-Balance Sheet Arrangements As of December 31, 2024, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Off-Balance Sheet Arrangements As of December 31, 2025, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
These free customers expose us to diverse traffic, threats, and problems, often allowing us to see potential security, 76 Table of contents performance, and reliability issues at the earliest stage. This knowledge allows us to improve our products and deliver more effective solutions to our paying customers.
These free customers expose us to diverse traffic, threats, and problems, often allowing us to see potential security, 77 Table of contents performance, and reliability issues at the earliest stage. This knowledge allows us to improve our products and deliver more effective solutions to our paying customers.
In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently 79 Table of contents or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.
In addition, other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently 80 Table of contents or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.
In May 2024, the Company entered into a credit agreement with a syndicated group of lenders, which provides for a senior secured $400.0 million revolving credit facility (the Revolving Credit Facility), with a sublimit of $30.0 million available for the issuance of letters of credit and $30.0 million available for swingline borrowings.
In May 2024, we entered into a credit agreement with a syndicated group of lenders, which provides for a senior secured $400.0 million revolving credit facility (the Revolving Credit Facility), with a sublimit of $30.0 million available for the issuance of letters of credit and $30.0 million available for swingline borrowings.
We believe that free cash flow and free cash flow margin are useful indicators of liquidity that provide information to management and investors about the amount of cash generated from our operations that, after the investments in property and equipment and capitalized internal-use software, can be used for strategic initiatives, including investing in our business, and strengthening our financial position.
We believe that free cash flow and free cash flow margin are useful 81 Table of contents indicators of liquidity that provide information to management and investors about the amount of cash generated from our operations that, after the investments in property and equipment and capitalized internal-use software, can be used for strategic initiatives, including investing in our business, and strengthening our financial position.
We believe macroeconomic uncertainty could persist during 2025. As a result, we expect that some or all of the negative trends described in this paragraph may emerge or recur during future quarters. To the extent challenging macroeconomic conditions persist, we may experience additional adverse effects on our business, financial condition, or results of operations in future periods.
We believe macroeconomic uncertainty could persist through 2026. As a result, we expect that some or all of the negative trends described in this paragraph may emerge or recur during future quarters. To the extent challenging macroeconomic conditions persist, we may experience additional adverse effects on our business, financial condition, or results of operations in future periods.
See Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for information relating to the useful lives of our servers-network infrastructure.
Refer to Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for information relating to the useful lives of our servers-network infrastructure.
We expect our general and administrative expenses to continue to increase in absolute dollars for the foreseeable future to support our growth as well as due to additional costs associated with legal, accounting, compliance, insurance, investor relations, and other costs as a result of operating as a public company.
We expect our general and administrative expenses to continue to increase in absolute dollars for the foreseeable future to support our growth as well as due to additional costs associated with legal, accounting, compliance, insurance, investor relations, and 84 Table of contents other costs as a result of operating as a public company.
Cost of revenue also includes employee-related costs, including salaries, benefits, and stock-based compensation for employees whose primary responsibilities relate to supporting our paying customers. Other costs included in cost of revenue include credit card fees related to processing customer transactions and allocated overhead costs.
Cost of revenue also includes employee-related costs, including salaries, benefits, and stock-based compensation for employees whose primary responsibilities relate to supporting our 83 Table of contents paying customers. Other costs included in cost of revenue include credit card fees related to processing customer transactions and allocated overhead costs.
For example, if free cash flow is negative, we may need to access cash reserves or other sources of capital to invest in strategic initiatives. One limitation of free cash flow and free cash flow margin is 80 Table of contents that they do not reflect our future contractual commitments.
For example, if free cash flow is negative, we may need to access cash reserves or other sources of capital to invest in strategic initiatives. One limitation of free cash flow and free cash flow margin is that they do not reflect our future contractual commitments.
We are not aware of any specific event or circumstance that would require an update to our estimates or assumptions or a revision of the carrying value of assets or liabilities as of February 20, 2025, the date of issuance of this Annual Report on Form 10-K.
We are not aware of any specific event or circumstance that would require an update to our estimates or assumptions or a revision of the carrying value of assets or liabilities as of the date of issuance of this Annual Report on Form 10-K.
Our global network, with a presence in more than 335 cities and over 125 countries worldwide, has helped to foster our strong international growth.
Our global network, with a presence in more than 330 cities and over 125 countries worldwide, has helped to foster our strong international growth.
For the period beyond the next 12 months, we believe we will be able to meet our working capital and capital expenditure needs from our existing cash, cash equivalents, available-for-sale-securities, available 89 Table of contents borrowings under the Revolving Credit Facility, the cash flows from our operating activities and, if necessary, proceeds from other potential equity or debt financings.
For the period beyond the next 12 months, we believe we will be able to meet our working capital and capital expenditure needs from our existing cash, cash equivalents, available-for-sale-securities, available borrowings under the Revolving Credit Facility, the cash flows from our operating activities and, if necessary, proceeds from other potential equity or debt financings.
However, we expect to continue to benefit from economies of scale as our customers increase the use of our global network and products. We intend to continue to invest additional resources in our global network and products and our customer support 82 Table of contents organizations as we grow our business.
However, we expect to continue to benefit from economies of scale as our customers increase the use of our global network and products. We intend to continue to invest additional resources in our global network and products and our customer support organizations as we grow our business.
International markets represented 49%, 48%, and 47% of our revenue in the years ended December 31, 2024, 2023, and 2022, respectively, and we intend to continue to invest in our international growth as a strategy to expand our customer base around the world. • Free customer base . Free customers are an important part of our business.
International markets represented 51%, 49%, and 48% of our revenue in the years ended December 31, 2025, 2024, and 2023, respectively, and we intend to continue to invest in our international growth as a strategy to expand our customer base around the world. • Free customer base . Free customers are an important part of our business.
Financing Activities Net cash provided by financing activities of $12.8 million during the year ended December 31, 2024 was primarily due to $19.8 million proceeds from the issuance of Class A common stock pursuant to the 2019 Employee Stock Purchase Plan (ESPP) and $12.9 million of proceeds from the exercise of vested stock options, which were partially offset by $16.8 million payment of tax withholding on Restricted Stock Unit (RSU) settlements, and $2.1 million cash paid for issuance costs on revolving credit facility.
Net cash provided by financing activities of $12.8 million during the year ended December 31, 2024 was primarily due to $19.8 million proceeds from the issuance of Class A common stock pursuant to the ESPP and $12.9 million of proceeds from the exercise of vested stock options, which were partially offset by $16.8 million payment of tax withholding on RSU settlements, and $2.1 million cash paid for issuance costs on revolving credit facility.
This section of this Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
This section of this Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024.
Interest Expense Interest expense consists primarily of contractual interest expense and amortization of the debt issuance costs on our 0.75% Convertible Senior Notes due 2025 (the 2025 Notes) and 0% Convertible Senior Notes due 2026 (the 2026 Notes, and together with the 2025 Notes, the Notes).
Interest Expense Interest expense consists primarily of contractual interest expense and amortization of the debt issuance costs on our 0% Convertible Senior Notes due 2026 (the 2026 Notes) and our 0% Convertible Senior Notes due 2030 (the 2030 Notes, and together with the 2026 Notes, the Notes).
The credit agreement permits the Company to increase the commitments under the Revolving Credit Facility by an aggregate principal amount of up to $150.0 million, subject to the satisfaction of certain conditions. The proceeds of the loans under the Revolving Credit Facility may be used for working capital and general corporate purposes.
The credit agreement permits us to 89 Table of contents increase the commitments under the Revolving Credit Facility by an aggregate principal amount of up to $150.0 million, subject to the satisfaction of certain conditions. The proceeds of the loans under the Revolving Credit Facility may be used for working capital and general corporate purposes.
General and Administrative General and administrative expenses consist primarily of employee-related costs, including salaries, benefits, and stock-based compensation expense for our finance, legal, human resources, and other administrative personnel, professional fees for external legal services, accounting, and other consulting services, bad debt expense, and allocated overhead costs.
General and Administrative General and administrative expenses consist primarily of employee-related costs, including salaries, benefits, and stock-based compensation expense for our finance, legal, human resources, and other administrative personnel, professional fees for external legal services, accounting, and other consulting services, bad debt expense, allocated overhead costs, lease impairment charges, and legal reserve and settlements.
The increase in revenue was primarily due to the addition of new paying customers, which increased by 25% during the year ended December 31, 2024, as well as expansion within our existing paying customers, which was reflected by our dollar-based net retention rate of 111% for the three months ended December 31, 2024.
The increase in revenue was primarily due to the addition of new paying customers, which increased by 40% during the year ended December 31, 2025, as well as expansion within our existing paying customers, which was reflected by our dollar-based net retention rate of 120% for the three months ended December 31, 2025.
Non-Operating Income (Expense) Interest Income 83 Table of contents Interest income consists primarily of interest earned on our cash, cash equivalents, and our investment holdings.
Non-Operating Income (Expense) Interest Income Interest income consists primarily of interest earned on our cash, cash equivalents, and our investment holdings.
The income tax expense of $7.9 million for the year ended December 31, 2024 was primarily related to withholding taxes in the United States and income tax expense from profitable foreign jurisdictions, offset by the partial release of the U.S. and U.K. valuation allowances in connection with acquisitions.
The income tax expense of $9.6 million and $7.9 million for the years ended December 31, 2025 and 2024, respectively, was primarily related to income tax expense from profitable foreign jurisdictions and withholding taxes, offset by the partial release of the U.S. and U.K. valuation allowances in connection with acquisitions.
As of December 31, 2024, our investment portfolio consisted of investment grade securities with an average credit rating of AA. We have generated significant operating losses from our operations as reflected in our accumulated deficit of $1,102.6 million as of December 31, 2024.
As of December 31, 2025, our investment portfolio consisted of investment grade securities with an average credit rating of AA-. We have generated significant operating losses from our operations as reflected in our accumulated deficit of $1,204.9 million as of December 31, 2025.
In addition to the contractual obligations described above, as of December 31, 2024, we had $6.5 million recognized as total restricted cash on our consolidated balance sheets mainly related to indemnity holdback consideration associated with asset acquisitions and business combinations.
In addition to the contractual obligations described above, as of December 31, 2025, we had $10.8 million recognized as total restricted cash on our consolidated balance sheets, related to indemnity holdback consideration associated with asset acquisitions and business combinations.
In addition, for developers building serverless applications, we offer our Cloudflare Workers product to these customers on a usage-based plan that is metered by requests and execution time.
In addition, for developers building serverless applications, we offer our developer solutions products to these customers on a usage-based plan that is metered by requests and execution time.
The following table summarizes the revenue by region based on the billing address of customers who use the Company’s products: Year Ended December 31, 2024 2023 2022 (dollars in thousands) Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage of Revenue United States $ 849,500 51 % $ 678,184 52 % $ 515,722 53 % Europe, Middle East, and Africa 466,499 28 % 356,569 28 % 258,291 26 % Asia Pacific 223,234 13 % 168,826 13 % 133,353 14 % Other 130,393 8 % 93,166 7 % 67,875 7 % Total $ 1,669,626 100 % $ 1,296,745 100 % $ 975,241 100 % Non-GAAP Financial Measures In addition to our results determined in accordance with generally accepted accounting principles in the United States (U.S.
The following table summarizes the revenue by region based on the billing address of customers who use the Company’s products: Year Ended December 31, 2025 2024 2023 (dollars in thousands) Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage of Revenue United States $ 1,072,996 49 % $ 849,500 51 % $ 678,184 52 % Europe, Middle East, and Africa 598,624 28 % 466,499 28 % 356,569 28 % Asia Pacific 329,760 15 % 223,234 13 % 168,826 13 % Other 166,557 8 % 130,393 8 % 93,166 7 % Total $ 2,167,937 100 % $ 1,669,626 100 % $ 1,296,745 100 % Non-GAAP Financial Measures In addition to our results determined in accordance with generally accepted accounting principles in the United States (U.S.
Our cash and cash equivalents primarily consist of cash and highly liquid money market funds and U.S. treasury securities. We also had available-for-sale securities of $1,708.2 million consisting of corporate bonds, U.S. treasury securities, U.S. government agency securities, and commercial paper.
Our cash and cash equivalents consist of cash, highly liquid money market funds, time deposits, U.S. treasury bills, and commercial paper. We also had available-for-sale securities of $3,157.7 million consisting of corporate bonds, U.S. treasury securities, U.S. government agency securities, and commercial paper.
The net cash outflow from changes in operating assets and liabilities was primarily the result of a $113.4 million increase in accounts receivable, net, which increased due to our growing customer base and timing of collections from our customers, a $101.5 million increase in deferred contract acquisition costs due to increased sales commissions from the addition of new customers, a $40.0 million increase in payments for operating lease liabilities, a $22.1 million increase in prepaid expenses and other current assets related to operating activities, which were partially offset by a $134.5 million increase in deferred revenue, a $21.8 million increase in accrued compensation, an $11.8 million increase in accounts payable related to operating activities, and a $4.0 million increase in accrued expenses and other current liabilities related to operating activities.
The net cash outflow from changes in operating assets and liabilities was primarily the result of a $148.9 million increase in deferred contract acquisition costs due to the addition of new customers, a $80.6 million increase in accounts receivable, net, which increased due to our growing customer base and timing of collections from our customers, a $80.0 million increase in prepaid expenses and other current assets, $63.8 million increase in payments for operating lease liabilities, and a $4.5 million increase in contract assets, which were partially offset by a $223.8 million increase in deferred revenue, an $26.7 million increase in accrued compensation, an $15.4 million increase in accrued expenses and other current liabilities, an $8.9 million increase in accounts payable related to operating activities, and a $6.8 million decrease in other noncurrent assets related to operating activities.
Year Ended December 31, 2024 2023 2022 (dollars in thousands) Loss from operations $ (154,761) $ (185,485) $ (201,203) Add: Stock-based compensation expense and related employer payroll taxes 356,423 287,500 217,766 Amortization of acquired intangible assets 12,747 20,002 15,169 Acquisition-related and other expenses 702 — 3,947 One-time compensation charge 15,000 — — Non-GAAP income from operations $ 230,111 $ 122,017 $ 35,679 Operating margin (9) % (14) % (21) % Non-GAAP operating margin (non-GAAP income from operations as a percentage of revenue) 14 % 9 % 4 % Free Cash Flow and Free Cash Flow Margin Free cash flow is a non-GAAP financial measure that we calculate as net cash provided by operating activities less cash used for purchases of property and equipment and capitalized internal-use software.
Year Ended December 31, 2025 2024 2023 (dollars in thousands) Loss from operations $ (207,205) $ (154,761) $ (185,485) Add: Stock-based compensation expense and related employer payroll taxes 489,938 356,423 287,500 Amortization of acquired intangible assets 14,998 12,747 20,002 Acquisition-related and other expenses 3,909 702 — One-time compensation charge — 15,000 — Lease asset impairment expense 5,097 — — Legal reserve and settlements (2,886) — — Non-GAAP income from operations $ 303,851 $ 230,111 $ 122,017 Operating margin (10) % (9) % (14) % Non-GAAP operating margin (non-GAAP income from operations as a percentage of revenue) 14 % 14 % 9 % Free Cash Flow and Free Cash Flow Margin Free cash flow is a non-GAAP financial measure that we calculate as net cash provided by operating activities less cash used for purchases of property and equipment and capitalized internal-use software.
Year Ended December 31, 2024 2023 2022 (dollars in thousands) Net cash provided by operating activities $ 380,429 $ 254,406 $ 123,595 Less: Purchases of property and equipment (185,037) (114,396) (143,606) Less: Capitalized internal-use software (28,477) (20,546) (19,758) Free cash flow $ 166,915 $ 119,464 $ (39,769) Net cash used in investing activities $ (330,224) $ (186,201) $ (235,696) Net cash provided by (used in) financing activities $ 12,785 $ (192,185) $ 6,347 Net cash provided by operating activities (as a percentage of revenue) 23 % 20 % 13 % Less: Purchases of property and equipment (as a percentage of revenue) (11) % (9) % (15) % Less: Capitalized internal-use software (as a percentage of revenue) (2) % (2) % (2) % Free cash flow margin 10 % 9 % (4) % Key Business Metrics In addition to our results determined in accordance with U.S.
Year Ended December 31, 2025 2024 2023 (dollars in thousands) Net cash provided by operating activities $ 603,114 $ 380,429 $ 254,406 Less: Purchases of property and equipment (315,617) (185,037) (114,396) Less: Capitalized internal-use software (26,935) (28,477) (20,546) Free cash flow $ 260,562 $ 166,915 $ 119,464 Net cash used in investing activities $ (1,806,700) $ (330,224) $ (186,201) Net cash provided by (used in) financing activities $ 2,003,729 $ 12,785 $ (192,185) Net cash provided by operating activities (as a percentage of revenue) 28 % 23 % 20 % Less: Purchases of property and equipment (as a percentage of revenue) (15) % (11) % (9) % Less: Capitalized internal-use software (as a percentage of revenue) (1) % (2) % (2) % Free cash flow margin 12 % 10 % 9 % Key Business Metrics In addition to our results determined in accordance with U.S.
We have a full valuation allowance on our U.S. federal, U.S. state, and U.K. deferred tax assets as we have concluded that it is more likely than not that the deferred tax assets will not be realized. 84 Table of contents Results of Operations The following tables set forth our consolidated results of operations for the periods presented in dollars and as a percentage of our revenue for those periods: Year Ended December 31, 2024 2023 2022 (in thousands) Revenue $ 1,669,626 $ 1,296,745 $ 975,241 Cost of revenue 378,702 307,005 232,610 Gross profit 1,290,924 989,740 742,631 Operating expenses: Sales and marketing 745,791 599,117 465,762 Research and development 421,374 358,143 298,303 General and administrative 278,520 217,965 179,769 Total operating expenses 1,445,685 1,175,225 943,834 Loss from operations (154,761) (185,485) (201,203) Non-operating income (expense): Interest income 87,426 68,167 14,877 Interest expense (5,196) (5,872) (4,984) Loss on extinguishment of debt — (50,300) — Other income (expense), net 1,660 (4,372) 577 Total non-operating income, net 83,890 7,623 10,470 Loss before income taxes (70,871) (177,862) (190,733) Provision for income taxes 7,929 6,087 2,648 Net loss $ (78,800) $ (183,949) $ (193,381) 85 Table of contents Year Ended December 31, 2024 2023 2022 Percentage of Revenue Data: Revenue 100 % 100 % 100 % Cost of revenue 23 24 24 Gross margin 77 76 76 Operating expenses: Sales and marketing 44 46 48 Research and development 25 27 31 General and administrative 17 17 18 Total operating expenses 86 90 97 Loss from operations (9) (14) (21) Non-operating income (expense): Interest income 5 5 2 Interest expense — — (1) Loss on extinguishment of debt — (4) — Other income (expense), net — — — Total non-operating income, net 5 1 1 Loss before income taxes (4) (13) (20) Provision for income taxes 1 1 — Net loss (5) % (14) % (20) % Comparison of the Years Ended December 31, 2024 and 2023 Revenue Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Revenue $ 1,669,626 $ 1,296,745 $ 372,881 29 % Revenue increased by $372.9 million, or 29%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
We have a full valuation allowance on our U.S. federal, U.S. state, and U.K. deferred tax assets as we have concluded that it is more likely than not that the deferred tax assets will not be realized. 85 Table of contents Results of Operations The following tables set forth our consolidated results of operations for the periods presented in dollars and as a percentage of our revenue for those periods: Year Ended December 31, 2025 2024 2023 (in thousands) Revenue $ 2,167,937 $ 1,669,626 $ 1,296,745 Cost of revenue 552,525 378,702 307,005 Gross profit 1,615,412 1,290,924 989,740 Operating expenses: Sales and marketing 920,817 745,791 599,117 Research and development 512,489 421,374 358,143 General and administrative 389,311 278,520 217,965 Total operating expenses 1,822,617 1,445,685 1,175,225 Loss from operations (207,205) (154,761) (185,485) Non-operating income (expense): Interest income 131,219 87,426 68,167 Interest expense (8,766) (5,196) (5,872) Loss on extinguishment of debt — — (50,300) Other income (expense), net (7,954) 1,660 (4,372) Total non-operating income, net 114,499 83,890 7,623 Loss before income taxes (92,706) (70,871) (177,862) Provision for income taxes 9,561 7,929 6,087 Net loss $ (102,267) $ (78,800) $ (183,949) 86 Table of contents Year Ended December 31, 2025 2024 2023 Percentage of Revenue Data: Revenue 100 % 100 % 100 % Cost of revenue 25 23 24 Gross margin 75 77 76 Operating expenses: Sales and marketing 43 44 46 Research and development 24 25 27 General and administrative 18 17 17 Total operating expenses 85 86 90 Loss from operations (10) (9) (14) Non-operating income (expense): Interest income 6 5 5 Interest expense — — — Loss on extinguishment of debt — — (4) Other income (expense), net — — — Total non-operating income, net 6 5 1 Loss before income taxes (4) (4) (13) Provision for income taxes 1 1 1 Net loss (5) % (5) % (14) % Comparison of the Years Ended December 31, 2025 and 2024 Revenue Year Ended December 31, Change 2025 2024 $ % (dollars in thousands) Revenue $ 2,167,937 $ 1,669,626 $ 498,311 30 % Revenue increased by $498.3 million, or 30%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.
The increase was primarily driven by an increase in interest rates and investment balance. Interest Expense Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Interest expense $ (5,196) $ (5,872) $ 676 (12) % Interest expense did not significantly fluctuate during the year ended December 31, 2024 as compared to the year ended December 31, 2023.
The increase was primarily driven by an increase in investment balance. Interest Expense Year Ended December 31, Change 2025 2024 $ % (dollars in thousands) Interest expense $ (8,766) $ (5,196) $ (3,570) 69 % Interest expense did not significantly fluctuate during the year ended December 31, 2025 as compared to the year ended December 31, 2024.
Impact of Macroeconomic Developments We are closely monitoring macroeconomic developments and global events, such as the conflicts in the Middle East and Ukraine and the potential worsening or expansion of those conflicts and other areas of geopolitical tension around the world, and other geopolitical events such as elections and other governmental changes, and, in each case, how they may adversely impact our and our customers’ businesses.
We are closely monitoring macroeconomic developments and global events, such as the tariffs described above, conflicts and geopolitical tension around the world, and other geopolitical events such as elections and other governmental changes, and, in each case, how they may adversely impact our and our customers’ businesses.
Year Ended December 31, 2024 2023 2022 (dollars in thousands) Gross profit $ 1,290,924 $ 989,740 $ 742,631 Gross margin 77 % 76 % 76 % Loss from operations $ (154,761) $ (185,485) $ (201,203) Non-GAAP income from operations $ 230,111 $ 122,017 $ 35,679 Operating margin (9) % (14) % (21) % Non-GAAP operating margin 14 % 9 % 4 % Net cash provided by operating activities $ 380,429 $ 254,406 $ 123,595 Net cash used in investing activities $ (330,224) $ (186,201) $ (235,696) Net cash provided by (used in) financing activities $ 12,785 $ (192,185) $ 6,347 Free cash flow $ 166,915 $ 119,464 $ (39,769) Net cash provided by operating activities (as a percentage of revenue) 23 % 20 % 13 % Free cash flow margin 10 % 9 % (4) % Paying customers (1) 237,714 189,791 162,086 Paying customers (> $100,000 Annualized Revenue) (1) 3,497 2,756 2,042 (1) Key business metrics are derived on a quarterly basis.
Year Ended December 31, 2025 2024 2023 (dollars in thousands) Gross profit $ 1,615,412 $ 1,290,924 $ 989,740 Gross margin 75 % 77 % 76 % Loss from operations $ (207,205) $ (154,761) $ (185,485) Non-GAAP income from operations $ 303,851 $ 230,111 $ 122,017 Operating margin (10) % (9) % (14) % Non-GAAP operating margin 14 % 14 % 9 % Net cash provided by operating activities $ 603,114 $ 380,429 $ 254,406 Net cash used in investing activities $ (1,806,700) $ (330,224) $ (186,201) Net cash provided by (used in) financing activities $ 2,003,729 $ 12,785 $ (192,185) Free cash flow $ 260,562 $ 166,915 $ 119,464 Net cash provided by operating activities (as a percentage of revenue) 28 % 23 % 20 % Free cash flow margin 12 % 10 % 9 % Paying customers (1) 332,466 237,714 189,791 Paying customers (> $100,000 Annualized Revenue) (1) 4,298 3,497 2,756 (1) Key business metrics are derived on a quarterly basis.
The remainder of the increase was primarily due to an increase of $24.5 million in expenses for marketing programs due to acquisitions, investments in brand awareness advertising, third-party industry events, and digital performance marketing, an increase of $9.7 million in co-location and bandwidth expenses for free customers, an increase of $7.2 million in travel-related expenses, an increase of $5.8 million in consulting expenses, and an increase of $4.1 million in subscription expenses.
The remainder of the increase was primarily due to an increase of $11.6 million in expenses for marketing programs, investments in brand awareness advertising, third-party industry events, and digital performance marketing, an increase of $10.5 million in co-location and bandwidth expenses for free customers, an increase of $8.8 million in consulting expenses, an increase of $7.8 million in travel-related expenses, an increase of $5.8 million in allocated overhead costs, and an increase of $5.0 million in third-party technology services costs.
The increase was primarily driven by $90.9 million in increased employee-related costs due to an 11% increase in headcount in our sales and marketing organization, including an increase of $19.2 million in stock-based compensation expense, and a $15.0 million one-time compensation charge.
The increase was primarily driven by $119.0 million in increased employee-related costs due to a 25% increase in headcount in our sales and marketing organization, including an increase of $36.5 million in stock-based compensation expense.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses. The ASU requires a public business entity to disclose additional information about specific expense categories in the notes to the financial statements for interim and annual reporting periods. The ASU does not change or remove current expense disclosure requirements.
The ASU requires a public business entity to disclose additional information about specific expense categories in the notes to the financial statements for interim and annual reporting periods. The ASU does not change or remove current expense disclosure requirements.
Other Income (Expense), net Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Other income (expense), net $ 1,660 $ (4,372) $ 6,032 * ______________ * Not meaningful Other income (expense), net increased by $6.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Other Income (Expense), net Year Ended December 31, Change 2025 2024 $ % (dollars in thousands) Other income (expense), net $ (7,954) $ 1,660 $ (9,614) * ______________ * Not meaningful Other income (expense), net decreased by $9.6 million for the year ended December 31, 2025 compared to the year ended December 31, 2024.
Cash Flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, 2024 2023 2022 (in thousands) Net cash provided by operating activities $ 380,429 $ 254,406 $ 123,595 Net cash used in investing activities $ (330,224) $ (186,201) $ (235,696) Net cash provided by (used in) financing activities $ 12,785 $ (192,185) $ 6,347 Operating Activities Net cash provided by operating activities during the year ended December 31, 2024 was $380.4 million, which resulted from a net loss of $78.8 million, adjusted for non-cash charges of $568.2 million and net cash outflow of $108.9 million from changes in operating assets and liabilities.
Cash Flows 90 Table of contents The following table summarizes our cash flows for the periods presented: Year Ended December 31, 2025 2024 2023 (in thousands) Net cash provided by operating activities $ 603,114 $ 380,429 $ 254,406 Net cash used in investing activities $ (1,806,700) $ (330,224) $ (186,201) Net cash provided by (used in) financing activities $ 2,003,729 $ 12,785 $ (192,185) Operating Activities Net cash provided by operating activities during the year ended December 31, 2025 was $603.1 million, which resulted from a net loss of $102.3 million, adjusted for non-cash charges of $802.7 million and net cash outflow of $97.3 million from changes in operating assets and liabilities.
Non-cash charges primarily consisted of $274.0 million for stock-based compensation expense, $135.8 million for depreciation and amortization expense, $61.4 million for amortization of deferred contract acquisition costs, $50.3 million for loss on extinguishment of debt, $44.8 million for non-cash operating lease costs, $13.6 million for provision for bad debt, and $4.5 million for amortization of convertible note issuance costs, which were partially offset by $44.4 million for net accretion of discounts.
Non-cash charges primarily consisted of $451.5 million for stock-based compensation expense, $189.7 million for depreciation and amortization expense, $101.6 million for amortization of deferred contract acquisition costs, $66.4 million for non-cash operating lease costs, $15.0 million for provision for bad debt, and $7.1 million for amortization of convertible note issuance costs, which were partially offset by $29.9 million for net accretion of discounts.
GAAP operating margin, respectively, excluding stock-based compensation expense and its related employer payroll taxes, amortization of acquired intangible assets, acquisition-related and other expenses. We exclude stock-based compensation expense, which is a non-cash expense, from certain of our non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance.
We exclude stock-based compensation expense, which is a non-cash expense, from certain of our non-GAAP financial measures because we believe that excluding this item provides meaningful supplemental information regarding operational performance.
The increase in the cost of revenue was primarily due to an increase of $32.6 million of third-party technology services costs, registry expenses, and payment processing fees, an increase of $23.9 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 $15.4 86 Table of contents million in employee-related costs, and an increase of $2.1 million in purchases of computer equipment and supplies.
The increase in the cost of revenue was primarily due to an increase of $59.2 million of third-party technology services costs, an increase of $54.1 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 87 Table of contents as increased capacity to support our growth, an increase of $45.2 million in depreciation expense due to an increase in server acquisitions and deployments, and an increase of $9.1 million in employee-related costs.
Net cash provided by operating activities during the year ended December 31, 2023 was $254.4 million, which resulted from a net loss of $183.9 million, adjusted for non-cash charges of $543.1 million and net cash outflow of 90 Table of contents $104.7 million from changes in operating assets and liabilities.
Net cash provided by operating activities during the year ended December 31, 2024 was $380.4 million, which resulted from a net loss of $78.8 million, adjusted for non-cash charges of $568.2 million and net cash outflow of $108.9 million from changes in operating assets and liabilities.
An entity is defined as a company, a government institution, a non-profit organization, or a distinct business unit of a large company. An active contract is defined as a customer relationship for which we have provided services during the quarter. The number of paying customers was 237,714, 189,791, and 162,086 as of December 31, 2024, 2023, and 2022, respectively.
An entity is defined as a company, a government institution, a non-profit organization, or a distinct business unit of a large company. An active contract is defined as a customer relationship for which we have provided services during the quarter.
Arrangements with customers generally do not provide the customer with the right to take possession at any time of our software operating our global network. Instead, customers are granted continuous access to our network and products over the contractual period. A time-elapsed output method is used to measure progress because we transfer control evenly over the contractual period.
Instead, customers are granted continuous access to our network and products over the contractual period. A time-elapsed output method is used to measure progress because we transfer control evenly over the contractual period.
Non-Operating Income (Expense) 87 Table of contents Interest Income Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Interest income $ 87,426 $ 68,167 $ 19,259 28 % Interest income increased by $19.3 million, or 28%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Non-Operating Income (Expense) 88 Table of contents Interest Income Year Ended December 31, Change 2025 2024 $ % (dollars in thousands) Interest income $ 131,219 $ 87,426 $ 43,793 50 % Interest income increased by $43.8 million, or 50%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.
We believe that we will achieve these objectives by continuing to focus on customer loyalty and adding additional products and functionality to our network. Our dollar-based net retention rate is a key way we measure our performance in these areas. Dollar-based net retention measures our ability to retain and expand recurring revenue from existing customers.
Dollar-Based Net Retention Rate Our ability to maintain long-term revenue growth and achieve profitability is dependent on our ability to retain and grow revenue generated from our existing paying customers. We believe that we will achieve these objectives by continuing to focus on customer loyalty and adding additional products and functionality to our network.
The increase was primarily driven by $64.3 million in increased employee-related costs due to a 25% increase in headcount in our research and development organization, including an increase of $15.4 million in stock-based compensation expense, and an increase of $4.5 million in subscription expenses, partially offset by increased capitalized internal-use software development costs of $11.1 million.
The increase was primarily driven by $79.8 million in increased employee-related costs due to a 22% increase in headcount in our research and development organization, including an increase of $11.4 million in stock-based compensation expense, and an increase of $4.3 million in allocated overhead costs.
Operating Expenses Sales and Marketing Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Sales and marketing $ 745,791 $ 599,117 $ 146,674 24 % Sales and marketing expenses increased by $146.7 million, or 24%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Operating Expenses Sales and Marketing Year Ended December 31, Change 2025 2024 $ % (dollars in thousands) Sales and marketing $ 920,817 $ 745,791 $ 175,026 23 % Sales and marketing expenses increased by $175.0 million, or 23%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.
To measure Annualized Revenue at the end of a quarter, we take the sum of revenue for each customer in the quarter and multiply that amount by four. For example, if we signed a new customer that generated $1,800 of revenue in a quarter, that customer would account for $7,200 of Annualized Revenue for that year.
For example, if we signed a new customer that generated $1,800 of revenue in a quarter, that customer would account for $7,200 of Annualized Revenue for that year.
Research and Development Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Research and development $ 421,374 $ 358,143 $ 63,231 18 % Research and development expenses increased by $63.2 million, or 18%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Research and Development Year Ended December 31, Change 2025 2024 $ % (dollars in thousands) Research and development $ 512,489 $ 421,374 $ 91,115 22 % Research and development expenses increased by $91.1 million, or 22%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.
General and Administrative Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) General and administrative $ 278,520 $ 217,965 $ 60,555 28 % General and administrative expenses increased by $60.6 million, or 28%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
General and Administrative Year Ended December 31, Change 2025 2024 $ % (dollars in thousands) General and administrative $ 389,311 $ 278,520 $ 110,791 40 % General and administrative expenses increased by $110.8 million, or 40%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.
These effects could include, among others, reduction or increased delays in purchasing decisions by existing and potential new paying customers, additional lengthening of the sales cycle for some of our existing and potential new paying customers, potential customer requests for concessions (including in terms of payment amounts and/or timing and earlier or additional termination rights), potential losses of paying customers as a result of economic distress or bankruptcy (particularly among our small and medium paying customer base), potential reductions in new non-U.S. customers and expansion of sales to existing non-U.S. paying customers as a result of our products, which are substantially all sold in U.S. dollars, becoming relatively more expensive for such customers due to the higher value of the U.S. dollar relative to other currencies, and increased costs for employee compensation and equipment purchases resulting from continued inflationary cost pressures. 77 Table of contents For further discussion of the challenges and risks we confront related to macroeconomic conditions and geopolitical tension around the world, please refer to Part I, Item 1A “Risk Factors” of this Annual Report on Form 10-K. 78 Table of contents Financial Measures and Key Business Metrics We review a number of financial and operating metrics, including the following non-GAAP financial measures and key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.
These effects could include, among others, reduction or increased delays in purchasing decisions by existing and potential new paying customers, additional lengthening of the sales cycle for some of our existing and potential new paying customers, potential customer requests for concessions (including in terms of payment amounts and/or timing and earlier or additional termination rights), potential losses of paying customers as a result of economic distress or bankruptcy (particularly among our small and medium paying customer base), potential reductions in new non-U.S. customers and expansion of sales to existing non-U.S. paying customers as a result of our products, which are substantially all sold in U.S. dollars, becoming relatively more expensive for such customers due to the higher value of the U.S. dollar relative to certain other currencies, and increased costs for employee compensation and equipment purchases resulting from continued inflationary cost pressures.
Cost of Revenue and Gross Margin Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Cost of revenue $ 378,702 $ 307,005 $ 71,697 23 % Gross margin 77 % 76 % Cost of revenue increased by $71.7 million, or 23%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Cost of Revenue and Gross Margin Year Ended December 31, Change 2025 2024 $ % (dollars in thousands) Cost of revenue $ 552,525 $ 378,702 $ 173,823 46 % Gross margin 75 % 77 % Cost of revenue increased by $173.8 million, or 46%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.
Our dollar-based net retention excludes the benefit of free customers that upgrade to a paid subscription between the prior and current periods, even though this is an important source of incremental growth. We believe this provides a more meaningful representation of our ability to add incremental business from existing paying customers as they renew and expand their contracts.
Our dollar-based net retention rate excludes professional services and the benefit of free customers that upgrade to a paid subscription between the prior and current periods, even though this is an important source of incremental growth.
Net cash used in investing activities during the year ended December 31, 2023 of $186.2 million resulted primarily from the purchases of available-for-sale securities of $1,877.5 million, capital expenditures of $114.4 million, capitalization of internal-use software development costs of $20.5 million, and cash paid for asset acquisitions of $6.1 million.
Investing Activities Net cash used in investing activities during the year ended December 31, 2025 of $1,806.7 million resulted primarily from the purchases of available-for-sale securities of $3,537.1 million, capital expenditures of $315.6 million, cash paid for asset acquisitions and business combinations, net of cash acquired of $50.9 million, and capitalization of internal-use software development costs of $26.9 million, which were partially offset by maturities of available-for-sale securities of $2,122.0 million.
The increase was primarily driven by $48.9 million in increased employee-related costs due to a 21% increase in headcount in our general and administrative organization, including an increase of $33.1 million in stock-based compensation expense. The remainder of the increase was primarily due to an increase of $6.1 million in professional fees for third-party accounting, consulting, and legal services.
The increase was primarily driven by $86.8 million in increased employee-related costs due to a 10% increase in headcount in our general and administrative organization, including an increase of $66.0 million in stock-based compensation expense.
Recent Accounting Pronouncements Refer to Note 2 to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for more information regarding recently adopted accounting pronouncements.
Recent Accounting Pronouncements Refer to Note 2 to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for more information regarding recently adopted accounting pronouncements. 92 Table of contents Recently Issued Accounting Pronouncements Not Yet Effective In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses.
In August 2021, we issued $1,293.8 million aggregate principal amount of the 2026 Notes in a private offering to qualified institutional buyers pursuant to Rule 144A promulgated under the Securities Act, from which we received total proceeds, net of initial purchaser discounts and commissions and debt issuance costs of $1,274.0 million.
In August 2021, we issued $1,293.8 million aggregate principal amount of the 2026 Notes, from which we received net proceeds of $1,274.0 million.
As of December 31, 2024, no loans were outstanding under the Revolving Credit Facility. Letters of credit issued under the credit agreement were not material as of December 31, 2024. As of December 31, 2024, we had cash and cash equivalents of $147.7 million, including $14.3 million held by our foreign subsidiaries.
As of December 31, 2025, no loans were outstanding under the Revolving Credit Facility. Letters of credit issued under the credit agreement were not material as of December 31, 2025.
The increase was primarily driven by larger unrealized gain due to changes in foreign currency exchange rates relative to the U.S. dollar compared to prior periods. 88 Table of contents Provision for Income Taxes Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Provision for income taxes $ 7,929 $ 6,087 $ 1,842 30 % We recorded an income tax expense of $7.9 million during the year ended December 31, 2024 as compared to an income tax expense of $6.1 million for the year ended December 31, 2023.
Provision for Income Taxes Year Ended December 31, Change 2025 2024 $ % (dollars in thousands) Provision for income taxes $ 9,561 $ 7,929 $ 1,632 21 % We recorded an income tax expense of $9.6 million during the year ended December 31, 2025 as compared to an income tax expense of $7.9 million for the year ended December 31, 2024.
The amendment in the ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. The ASU is effective for annual periods beginning after December 15, 2024. We are currently evaluating the impact of the new standard.
The ASU is effective for annual reporting periods beginning after December 15, 2027, and for interim reporting periods within those annual reporting periods, with early adoption permitted. We are currently evaluating the impact of the new standard.
Paying Customers (> $100,000 Annualized Revenue) While we continue to grow customers across all sizes, over time, our large customers have contributed an increasing share of our revenue. We view the number of customers with Annualized Revenue greater than $100,000 as indicative of our penetration within large enterprise accounts.
The number of paying customers was 332,466, 237,714, and 189,791 for the three months ended December 31, 2025, 2024, and 2023, respectively. Paying Customers (> $100,000 Annualized Revenue) While we continue to grow customers across all sizes, over time, our large customers have contributed an increasing share of our revenue.
Our Annualized Revenue 81 Table of contents metric also includes any usage charges by a customer during a period, which represents a small portion of our total revenue and may not be recurring. As a result, Annualized Revenue may be higher than actual revenue over the course of the year.
Our Annualized Revenue metric also includes any usage charges by a customer during a period. As a result, Annualized Revenue may be higher than actual revenue over the course of the year. The number of paying customers with Annualized Revenue greater than $100,000 was 4,298, 3,497, and 2,756 for the three months ended December 31, 2025, 2024, and 2023, respectively.
Our dollar-based net retention rates for the three months ended December 31, 2024, 2023, and 2022 were 111%, 115%, and 122%, respectively. Components of Our Results of Operations Revenue We generate revenue primarily from sales to our customers of subscriptions to access our network and products, together with related support services.
Components of Our Results of Operations Revenue We generate revenue primarily from sales to our customers of subscriptions to access our network and products, together with related support services. Arrangements with customers generally do not provide the customer with the right to take possession at any time of our software operating our global network.
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The number of paying customers with Annualized Revenue greater than $100,000 was 3,497, 2,756, and 2,042 as of December 31, 2024, 2023, and 2022, respectively. Dollar-Based Net Retention Rate Our ability to maintain long-term revenue growth and achieve profitability is dependent on our ability to retain and grow revenue generated from our existing paying customers.
Added
Impact of Macroeconomic Developments The United States government has implemented, or threatened to implement, tariffs on some or all of the goods imported into the United States from a number of other countries around the world.
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This increase was partially offset by $6.4 million of decreased depreciation expense.
Added
We purchase a portion of the equipment that we use to operate our network from suppliers located outside the United States and we also purchase this equipment from United States suppliers that themselves purchase components from suppliers located outside the United States.
Removed
The decrease in depreciation expense was mainly driven by the $14.9 million decrease due to the impact of the change in useful life of servers associated with cost of revenue from 4 years to 5 years, partially offset by an increase related to purchases of equipment located in co-location facilities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA sensitivity analysis performed on our investment portfolio indicated that a hypothetical 1% increase or decrease in interest rates would have resulted in an increase or decrease of $12.1 million in the market value of our investments in available-for-sale securities as of December 31, 2024.
Biggest changeA sensitivity analysis performed on our investment portfolio indicated that a hypothetical 1% increase or decrease in interest rates would have resulted in an increase of $24.5 million or decrease of $25.8 million in the market value of our investments in available-for-sale securities as of December 31, 2025. 93 Table of contents Foreign Currency Risk The functional currency of our foreign subsidiaries is the U.S. dollar and our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates relative to the U.S. dollar.
We have a cash flow hedging program in place and enter into derivative transactions to manage certain foreign currency exchange risks that arise in our ordinary business operations. We do not enter into foreign currency exchange contracts for speculative or trading purposes. All contracts have a maturity of 12 months or less.
We have a cash flow hedging program in place and enter into derivative transactions to manage certain foreign currency exchange risks that arise in our ordinary business operations. We do not enter into foreign currency exchange contracts for speculative or trading purposes. All of our foreign currency exchange contracts have a maturity of 12 months or less.
As exchange rates may fluctuate significantly between periods, revenue and operating expenses, when converted into U.S. dollars, may also experience significant fluctuations between periods. During the years ended December 31, 2024, 2023, and 2022, a hypothetical 10% strengthening or weakening of the U.S. dollar applicable to our business would not have had a material impact on our consolidated financial statements.
As exchange rates may fluctuate significantly between periods, revenue and operating expenses, when converted into U.S. dollars, may also experience significant fluctuations between periods. During the years ended December 31, 2025, 2024, and 2023, a hypothetical 10% strengthening or weakening of the U.S. dollar applicable to our business would not have had a material impact on our consolidated financial statements.
Nonetheless, if our costs in connection with the operation of our business were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations. 93 Table of contents
Nonetheless, if our costs in connection with the operation of our business were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations. 94 Table of contents
Consequently, our interest expense would fluctuate if we were to borrow any amounts under the Revolving Credit Facility as a result of the floating interest rates applicable to such borrowings and potential changes in the applicable margin resulting from changes to our total net leverage ratio. As of December 31, 2024, no loans were outstanding under the Revolving Credit Facility.
Consequently, our interest expense would fluctuate if we were to borrow any amounts under the Revolving Credit Facility as a result of the floating interest rates applicable to such borrowings and potential changes in the applicable margin resulting from changes to our total net leverage ratio. As of December 31, 2025, no loans were outstanding under the Revolving Credit Facility.
In addition, the fair market value of the 2026 Notes fluctuates when the market price of our Class A common stock fluctuates. 92 Table of contents We are exposed to the impact of changes in interest rates in connection with borrowings under the Revolving Credit Facility.
In addition, the fair market value of the Notes fluctuates when the market price of our Class A common stock fluctuates. We are exposed to the impact of changes in interest rates in connection with borrowings under the Revolving Credit Facility.
Our expenses are generally denominated in the currencies of the countries in which our operations are located and are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the British Pound, Euro, and Singapore Dollar.
The majority of our revenue is denominated in U.S. dollars. Our expenses are generally denominated in the currencies of the countries in which our operations are located and are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the British Pound, Euro, and Singapore Dollar.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We have operations in the United States and internationally, and we are exposed to market risk in the ordinary course of our business. Interest Rate Risk In August 2021, we issued $1,293.8 million in aggregate principal amount of the 2026 Notes.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We have operations in the United States and internationally, and we are exposed to market risk in the ordinary course of our business. Interest Rate Risk In August 2021 and June 2025, we issued $1,293.8 million and $2,000.0 million in aggregate principal amounts of the 2026 Notes and 2030 Notes, respectively.
Letters of credit issued under the credit agreement were not material as of December 31, 2024. As of December 31, 2024, we had cash and cash equivalents of $147.7 million and available-for-sale securities of $1,708.2 million. The carrying amount of our cash equivalents approximates fair value, due to the short maturities of these instruments.
Letters of credit issued under the credit agreement were not material as of December 31, 2025. As of December 31, 2025, we had cash and cash equivalents of $943.5 million and available-for-sale securities of $3,157.7 million. The carrying amount of our cash equivalents approximates fair value, due to the short maturities of these instruments.
We do not require nor are we required to post collateral of any kind related to our foreign currency derivatives. Inflation Risk We do not believe that inflation has had a material effect on our business, results of operations, or financial condition.
We do not require nor are we required to post collateral of any kind related to our foreign currency derivatives. These derivatives are designated as cash flow hedges under accounting guidance for derivatives and hedging. Inflation Risk We do not believe that inflation has had a material effect on our business, results of operations, or financial condition.
These derivatives are designated as cash flow hedges under accounting guidance for derivatives and hedging. We enter into master netting agreements with select financial institutions to reduce our credit risk, and we trade with several counterparties to reduce our concentration risk with any single counterparty. We do not have significant exposure to counterparty credit risk at this time.
We enter into master netting agreements with select financial institutions to reduce our credit risk, and we trade with several counterparties to reduce our concentration risk with any single counterparty. We do not have significant exposure to counterparty credit risk at this time.
The 2026 Notes do not have regularly scheduled interest payments; therefore, we do not have economic interest rate exposure on the 2026 Notes. We carry the 2026 Notes at face value less the unamortized issuance costs on our consolidated balance sheets.
The Notes do not have regularly scheduled interest payments; therefore, we do not have economic interest rate exposure on the Notes. We carry the Notes at face value less the unamortized issuance costs on our consolidated balance sheets. Generally, the fair market value of the Notes will increase as interest rates decline and decrease as interest rates rise.
Removed
Generally, the fair market value of the 2026 Notes will increase as interest rates decline and decrease as interest rates rise.
Removed
Foreign Currency Risk The functional currency of our foreign subsidiaries is the U.S. dollar and our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates relative to the U.S. dollar. The majority of our revenue is denominated in U.S. dollars.

Other NET 10-K year-over-year comparisons