Cloudflare (NET) risk factors, FY2025 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 future37% rewritten
2. 02We have experienced rapid revenue growth, which may not be indicative of our future performance30% rewritten
3. 03Adverse economic conditions, including reduced spending on products and solutions for network security, performance, and reliability, may adversely impact our revenue and profitability29% rewritten
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. 10We believe our long-term value as a company will be greater if we focus on growth, which may negatively impact our profitability
11. 11If we are not able to maintain and promote our brand, our business and results of operations may be adversely affected
12. 12Our 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
13. 13Our 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
14. 14Our business depends, in part, on sales to the United States and foreign government organizations, which are subject to a number of challenges and risks
15. 15We rely on third-party software for certain essential financial and operational services, and a failure or disruption in these services could materially and adversely affect our ability to manage our business effectivelyNew
16. 16Our business is exposed to risks associated with credit card and other online payment processing methods
17. 17Because 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 discern21% rewritten
18. 18If 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
19. 19Future 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
20. 20Certain 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
21. 21We 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. 22We 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. 23If our customers’ or partners’ access to our network and products is interrupted or delayed for any reason, our business could suffer
3. 24Abuse, misuse, or other unauthorized use of our internal network, including network services tools, could cause significant harm to our business and reputation
4. 25Detrimental 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
5. 26If 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 harmed22% rewritten
6. 27The 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
7. 28Any of the above results could materially and adversely affect our business, results of operations, and financial condition
8. 29If our products do not obtain and maintain market acceptance, our ability to grow our business and our results of operations may be adversely affected57% rewritten
9. 30We expect to hold periodically certain types of cryptocurrency and similar types of digital assets that may be subject to unique regulatory risks, volatile market prices, and risks of loss, which could harm our business and reputationNew

Risks Related to Legal, Tax, and Regulatory Matters

1. 31Activities 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. 32Our policies regarding user privacy could cause us to experience adverse business and reputational consequences with customers, employees, suppliers, government entities, and other third parties24% rewritten
3. 33Our 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
4. 34Failure 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 business28% rewritten
5. 35Our actual or perceived failure to comply with privacy, data protection, information security, AI, and other applicable laws, regulations, and obligations could harm our business22% rewritten
6. 36Some countries are also considering or have enacted legislation and/or certification schemes requiring local storage and processing of data, or other sovereignty-oriented requirements, that could increase the cost and complexity of delivering our servicesNew
7. 37We 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
8. 38We 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 law24% rewritten
9. 39Our 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
10. 40Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited21% rewritten
11. 41If 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. 42Our 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. 43We are exposed to fluctuations in currency exchange rates, which could negatively affect our results of operations
3. 44Our 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 efforts32% rewritten
4. 45Our 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. 46We 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 laws20% rewritten
6. 47In 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. 48We 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. 49Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses
3. 50Our failure to protect our intellectual property rights and proprietary information could diminish our brand and other intangible assets
4. 51We 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. 52The trading price of our Class A common stock may be volatile, and you could lose all or part of your investment
2. 53The 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. 54The 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. 55We have broad discretion over the use of the net proceeds from our financing activities, and we may not use them effectively
5. 56Delaware 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. 57Our 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. 58An active trading market for our Class A common stock may not be sustained
8. 59We do not intend to pay dividends for the foreseeable future

Risks Related to our Indebtedness

1. 60Our 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. 61Repaying 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
3. 62We may not have the ability to raise the funds necessary for cash settlement upon conversion of the Notes or to repurchase the Notes for cash upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion of the Notes or to repurchase the Notes48% rewritten
4. 63The conditional conversion feature of the Notes, when triggered, may adversely affect our financial condition and operating results32% rewritten
5. 64Transactions relating to the Notes may affect the value of our Class A common stock36% rewritten
6. 65We are subject to counterparty risk with respect to the capped call transactions

General Risk Factors

1. 66If 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
2. 67Our business is subject to the risks of catastrophic events
3. 68Our 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
4. 69The 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