What happened

Shares of Cloudflare (NYSE: NET) rose 44.5% in November, according to data from S&P Global Market Intelligence. The stock climbed early in the month after the company posted blockbuster third-quarter results and continued to climb higher in conjunction with a record-setting rally for the broader market in the month.

^SPX data by YCharts

Cloudflare published third-quarter results on Nov. 5, posting sales and earnings for the period that topped the market's expectations. The company posted a non-GAAP (adjusted) loss per share of $0.02 on sales of $114.2 million, topping the average analyst estimate's call for a per-share loss of $0.05 on revenue of $103.2 million.

Image source: Getty Images.

So what

Cloudflare stock has skyrocketed this year amid signs that the business's competitive position is strengthening. The company has continued to roll out new services and enjoyed surging demand for its web security, content delivery, and enterprise networking offerings. Cloudflare's share price has climbed a staggering 380% year to date, and the business has been delivering results that justify its stock's eye-catching run.

Sales growth of 54.5% year over year in the third quarter came in significantly ahead of management's guidance and analyst targets, and gross margins for the period came in at 76.3%. While the business isn't posting profits yet, Cloudflare's impressive sales growth, stellar gross margins, and industry-leading solutions in a rapidly expanding corner of the tech industry point to huge profit potential down the line.

Now what

Cloudflare stock has continued to post big gains in December. The company's share price has risen roughly 9% in the month so far.

NET data by YCharts

Cloudflare expects fourth-quarter revenue to come in between $117.5 million and $118.5 million. For the full-year period, the company is guiding for an adjusted loss between $0.12 and $0.13 per share on revenue between $422.5 million and $423.5 million. Prior to the very strong Q3 results, management was targeting full-year sales between $404 million and $408 million.

Cloudflare has a market capitalization of roughly $25 billion and is valued at approximately 60 times this year's expected sales.

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Keith Noonan owns shares of Cloudflare, Inc. The Motley Fool owns shares of and recommends Cloudflare, Inc. The Motley Fool has a disclosure policy.