Cloudflare (NET) risk factors, 2025 10-K

Risks Related to Our Business and Our Industry

1. 01We have a history of net losses and may not be able to achieve or sustain profitability in the future
2. 02We have experienced rapid revenue growth, which may not be indicative of our future performance
3. 03Adverse economic conditions, including reduced spending on products and solutions for network security, performance, and reliability, may adversely impact our revenue and profitability
4. 04If we are unable to attract new paying and free customers, our future results of operations could be harmed
5. 05If we are unable to effectively attract, expand, and retain sales to large customers, or we fail to mitigate the additional risks associated with serving large customers, our business, results of operation, and financial condition may suffer
6. 06Although offering a free plan for certain of our products is an important part of our business strategy, we may not be able to realize all of the expected benefits of this strategy and the costs and other detriments associated with our free plan could outweigh the benefits we receive from our free customers
7. 07We face intense and increasing competition, which could adversely affect our business, financial condition, and results of operations
8. 08If we do not effectively attract, train, and retain our sales force to be able to sell our existing and new products and product features, we may be unable to add new contracted customers, or increase sales to our existing customers and our business would be adversely affected
9. 09Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business
10. 10agreements have no specific duration and constitute at-will employment. We also do not maintain key person life insurance policies on any of our employees
11. 11We believe our long-term value as a company will be greater if we focus on growth, which may negatively impact our profitability
12. 12If we are not able to maintain and promote our brand, our business and results of operations may be adversely affected
13. 13Our growth depends, in part, on the success of our strategic relationships with third parties, and if we fail to continue to expand, grow, and retain these relationships then our business, results of operations, and financial condition may be adversely impacted
14. 14Our ability to maintain customer satisfaction depends in part on the quality of our customer support. Failure to maintain high-quality customer support could have an adverse effect on our business, results of operation, and financial condition
15. 15Our business depends, in part, on sales to the United States and foreign government organizations, which are subject to a number of challenges and risks
16. 16We 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
17. 17Our business is exposed to risks associated with credit card and other online payment processing methods
18. 18Because we recognize revenue from subscriptions for our products over the term of the subscription, downturns or upturns in new business may not be immediately reflected in our results of operations and may be difficult to discern
19. 19If our estimates, assumptions, or judgments relating to our critical accounting policies prove to be incorrect or financial reporting standards or interpretations change, our results of operations could be adversely affected
20. 20Future acquisitions, strategic investments, partnerships, or alliances could be difficult to identify and integrate, divert the attention of key management personnel, disrupt our business, dilute stockholder value, and adversely affect our results of operations, financial condition, and prospects
21. 21in retaining those new key employees. In addition, we may not successfully evaluate or utilize the acquired technology and accurately forecast the financial impact of an acquisition transaction, including accounting charges
22. 22Certain of our key business metrics could prove to be inaccurate, and any real or perceived inaccuracies may harm our reputation and negatively affect our business
23. 23We may need additional capital, and we cannot be certain that additional financing will be available on favorable terms, or at all

Risks Related to Our Network and Products

1. 24We may not be able to respond to rapid technological changes or develop new products and product features that are attractive to, and that contain all of the capabilities required by, our current and prospective future customers, especially large customers
2. 25websites, 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
3. 26If our customers’ or partners’ access to our network and products is interrupted or delayed for any reason, our business could suffer
4. 27Abuse, misuse, or other unauthorized use of our internal network, including network services tools, could cause significant harm to our business and reputation
5. 28Detrimental changes in, or the termination of, any of our co-location relationships, ISP partnerships, or our other interconnection relationships with ISPs could adversely impact our business, results of operations, and financial condition
6. 29If our network and products do not interoperate with our customers’ internal networks and infrastructure or with third-party products, websites, or services, our network may become less competitive and our results of operations may be harmed
7. 30The actual or perceived failure of our products to block malware or prevent a security breach or incident could harm our reputation and adversely impact our business, results of operations, and financial condition
8. 31Any of the above results could materially and adversely affect our business, results of operations, and financial condition
9. 32If our products do not obtain and maintain market acceptance, our ability to grow our business and our results of operations may be adversely affected
10. 33condition. To the extent our competitors have, and we do not have, these certifications, we may lose the opportunity to obtain subscriptions from certain potential paying customers

Risks Related to Legal, Tax, and Regulatory Matters

1. 34Activities of our paying and free customers or the content of their websites and other Internet properties may violate applicable laws and/or our terms of service and could subject us to lawsuits, regulatory enforcement actions, and/or liability in various jurisdictions
2. 35no assurance that we will not face similar litigation in the future or that we will prevail in any litigation we are facing or may face. An adverse decision in one or more of these lawsuits could materially and adversely affect our business, results of operations, and financial condition
3. 36Our policies regarding user privacy could cause us to experience adverse business and reputational consequences with customers, employees, suppliers, government entities, and other third parties
4. 37Our business could be adversely impacted by changes in Internet access for our customers as a result of competitive behavior or laws specifically governing the Internet
5. 38Failure to comply with laws and regulations applicable to our business could subject us to fines and penalties and could also cause us to lose customers or otherwise harm our business
6. 39conflicting requirements, may make it challenging for us to identify and comply with all new global regulations that may apply to our services
7. 40Our actual or perceived failure to comply with privacy, data protection, information security, and other applicable laws, regulations, and obligations could harm our business
8. 41In addition, the interpretation of existing privacy, data protection, and information security laws and regulations by governmental entities and the courts may change significantly over time in a manner that can have a significantly adverse impact on both our business and our customers’ businesses
9. 42We are subject to anti-corruption, anti-bribery, and similar laws, and noncompliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation
10. 43We may face fines, penalties, or other costs, either directly or vicariously, if any of our partners, resellers, contractors, vendors or other third parties fail to adhere to their compliance obligations under our policies and applicable law
11. 44to private parties or government regulators, which could adversely impact our business, results of operations, and financial condition
12. 45Our results of operations may be harmed if we are required to collect sales and use, value-added, or similar taxes for our products in jurisdictions where we have not historically done so
13. 46Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited
14. 47If we are deemed an investment company under the Investment Company Act of 1940, as amended (the 1940 Act), applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, results of operations, and financial condition

Risks Related to International Operations

1. 48Our international operations expose us to significant risks, and failure to manage those risks could materially and adversely impact our business and results of operations
2. 49We are exposed to fluctuations in currency exchange rates, which could negatively affect our results of operations
3. 50Our business could be adversely impacted by the decision of foreign governments, Internet service providers, or others, to block transmission from Cloudflare IP addresses or domains in order to enforce certain Internet content blocking efforts
4. 51Our network presence within China is dependent upon our commercial relationship with JD Cloud, and any detrimental changes in, or the termination of, that relationship could jeopardize our ability to offer an integrated global network that includes China
5. 52We are subject to governmental trade sanctions laws, and export and import controls, that could impair our ability to compete in international markets and subject us to liability if we are not in full compliance with applicable laws
6. 53In addition, various countries regulate the import of certain technologies and have enacted or could enact laws that could limit our ability to provide our products and operate our network or could limit our customers’ ability to access or use our network and products in those countries

Risks Related to Intellectual Property

1. 54We are currently, and may be in the future, party to intellectual property rights claims and other litigation matters that, if resolved adversely, could have a material impact on our business, results of operations, or financial condition
2. 55Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses
3. 56Our failure to protect our intellectual property rights and proprietary information could diminish our brand and other intangible assets
4. 57We depend and rely upon software and technologies licensed from third parties to operate our business, and interruptions or the unavailability of these technologies may adversely affect our products, network, business, and results of operations

Risks Related to Ownership of Our Class A Common Stock

1. 58The trading price of our Class A common stock may be volatile, and you could lose all or part of your investment
2. 59The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of our initial public offering, and it may depress the trading price of our Class A common stock
3. 60The market price of our Class A common stock could decline as a result of sales of a large number of shares of such stock, and the perception that these sales could occur may also depress the market price of our Class A common stock
4. 61We have broad discretion over the use of the net proceeds from our financing activities, and we may not use them effectively
5. 62Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer, or proxy contest difficult, thereby depressing the market price of our Class A common stock
6. 63Our Class A common stock market price and trading volume could decline if equity or industry analysts do not publish research or publish inaccurate or unfavorable research about our business
7. 64An active trading market for our Class A common stock may not be sustained
8. 65We do not intend to pay dividends for the foreseeable future

Risks Related to our Indebtedness

1. 66Our credit agreement and any other credit or similar agreements into which we may enter in the future may restrict our operations, particularly our ability to respond to changes or to take certain actions regarding our business
2. 67Repaying 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
3. 68Any of these factors could harm our business, results of operations, and financial condition. In addition, if we incur additional indebtedness, the risks related to our business and our ability to service or repay our indebtedness would increase
4. 69contain limitations on our ability to pay cash upon conversion of the 2026 Notes or to repurchase the 2026 Notes
5. 70The conditional conversion feature of the 2026 Notes, when triggered, may adversely affect our financial condition and operating results
6. 71Transactions relating to the 2026 Notes may affect the value of our Class A common stock
7. 72We are subject to counterparty risk with respect to the capped call transactions
8. 73If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired
9. 74Our business is subject to the risks of catastrophic events
10. 75Our partners, suppliers, and customers are also subject to the risk of catastrophic events. In those events, our ability to deliver our products in a timely manner, as well as the demand for our products, may be divided on account of factors outside our control
11. 76The requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members