Cloudflare, Inc. Class A common stock, par value $0.001 per shareNET

Economic and market conditions · Consumer spending and confidence

Our operations and financial performance depend in part on worldwide economic conditions and the impact these conditions have on levels of spending on products and solutions for network security, performance, and reliability. Our business depends on the overall demand for these products and on the economic health and general willingness of our current and prospective customers to purchase our products.

Geopolitical and trade · Regulatory and policy uncertainty

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 could adversely affect our business.

Social and demographic · Stakeholder activism and pressure

Activities of our paying and free customers or the content of their websites and other Internet properties could cause us to experience significant adverse political, business, and reputational consequences with customers, employees, suppliers, government entities, and other third parties.

Natural and catastrophic events · Force majeure and business interruption

Our business is subject to the risks of catastrophic events. The occurrence of any catastrophic event, including an earthquake, volcanic event, fire, flood, tsunami, the effects of climate change, or other weather event, power loss, telecommunications failure, software or hardware malfunction, epidemic or pandemic disease, cyber attack, military conflict or war, or terrorist attack, could result in lengthy interruptions in our service.

Legal and litigation · Employment and labor law compliance

Our business is subject to regulation by various federal, state, local, and non-U.S. governmental agencies, including agencies responsible for monitoring and enforcing compliance with various legal obligations, such as privacy, data protection, and information security laws and regulations, intellectual property laws, telecommunications laws and regulations, employment and labor laws, workplace safety, environmental laws, consumer protection laws.

Tax and financial reporting · Audit and regulatory examinations

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.

Industry regulation · Regulatory compliance and changes

Failure 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. Our business is subject to regulation by various federal, state, local, and non-U.S. governmental agencies, including agencies responsible for monitoring and enforcing compliance with various legal obligations, such as privacy, data protection, and information security laws and regulations.

Industry regulation · Licensing and permits

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 could adversely affect our ability to attract new customers.

Information management · Technology vendor dependence

We 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. We rely on software, services, and other technology from third parties that we incorporate into, or integrate with, our network and products.

Cybersecurity and data protection · Data breaches and cyber attacks

We face security threats from malicious third parties that could obtain unauthorized access to our internal systems, networks, and data, including the equipment at our network and core co-location facilities. For example, in November 2023, we detected that a likely nation-state threat actor had gained unauthorized access to one of our internal systems.

Technology infrastructure · Technology systems and infrastructure failure

If our global network that delivers our products or the core co-location facilities we use to operate our network are damaged, interfered with, or otherwise fail to meet the requirements of our business or local regulations, our ability to provide access to our network and products to our customers and maintain the performance of our network could be negatively impacted, which could cause our business, results of operations and financial condition to suffer.

Cybersecurity and data protection · Third party data security and vendors

We 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 effectively. We rely on third-party software to provide many essential financial and operational services to support our business.

Project and contract management · Government contract dependency

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.

Strategic execution · Merger acquisition and divestiture risks

Future 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. Part of our business strategy is to make acquisitions of other companies, products, and technologies.

Market position and competition · Pricing pressure and margin compression

Our competitors may respond to market conditions by lowering prices and attempting to lure away our customers. Moreover, our competitors may respond to market conditions by lowering prices and attempting to lure away our customers, which could result in reduced pricing power and margin compression.

Reputation and brand · Brand damage and negative publicity

If we are not able to maintain and promote our brand, our business and results of operations may be adversely affected. We believe that maintaining and enhancing our reputation as a provider of products with the highest levels of security, performance, and reliability is critical to our relationship with our existing customers and our ability to attract new customers.

Corporate governance · Shareholder rights and activism

The 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. Our Class B common stock has 10 votes per share and our Class A common stock has one vote per share.

Corporate governance · Board composition and independence

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.

Stakeholder relations · Customer satisfaction and loyalty

Our 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. We believe that the successful adoption and usage of our network and products requires a high level of support and engagement for many of our customers, particularly our large customers.

Credit and liquidity · Access to capital and financing

We may need additional capital, and we cannot be certain that additional financing will be available on favorable terms, or at all. Although we currently anticipate that our existing cash, cash equivalents, available-for-sale securities, available borrowing under the Revolving Credit Facility, and cash flow from operations will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months, we may require additional financing.