What happened

Shares of Cloudflare (NYSE:NET) climbed 23.4% in May, according to data from S&P Global Market Intelligence. The stock soared after the company published first-quarter results that significantly exceeded the market's expectations early in the month. 

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Cloudflare published first-quarter earnings results on May 7, topping the market's average targets for both sales and earnings in the period. Revenue rose 48% year over year to reach $91 million, and the web infrastructure and cybersecurity company's non-GAAP (adjusted) loss per share came in at $0.04 -- a substantial improvement from the per-share loss of $0.19 that it posted in the prior-year period. The average analyst estimate had called for a per-share loss of $0.06 on sales of $86.97 million.

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So what

Cloudflare had its initial public offering in September, and the company's stock now trades up roughly 69% from the closing price on the day of its market debut. Shares got a big boost following the company's fourth-quarter report in February, and strong first-quarter results helped push Cloudflare's valuation to an all-time high last month. 

Cloudflare's Q1 results were impressive across the board. The company's base of large customers (defined as those who generate over $100,000 in annualized revenue) jumped roughly 65.5% year over year to reach 556. Gross margin for the quarter came in at an impressive 77.2%, up from 76.7% in Q1 2019.

Now what

Cloudflare stock has continued to move higher in June. The company's share price is up roughly 4% in the month so far. 

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Cloudflare is guiding for second-quarter revenue to come in between $93.5 million and $94.5 million, representing a year-over-year increase between 39% and 40%. Management expects a per-share loss between $0.05 and $0.06 for the period.  

Full-year revenue is projected to be between $389 million and $393 million, representing an increase of 36.5% year over year the midpoint of the target. The company is guiding for a per-share loss between $0.19 and $0.21 for the year. 

Cloudflare is valued at roughly 23.5 times the average analyst target for this year's sales. That valuation might look lofty, but the business has strong competitive advantages and looks primed for dramatic growth over the long term. Cloudflare enjoys very strong positions in essential delivery networks services and crucial internet security infrastructure, and it's managed to grow its revenue at a compound annual growth rate of roughly 50% since 2016. 

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