Internet security and performance expert Cloudflare (NYSE: NET) beat first-quarter earnings estimates, but investors are worried the company’s growth rate is slowing. Shares of Cloudflare traded down 17% as of 12:15 p.m. ET on guidance that was not as robust as some had hoped for.

Growth is slowing

Cloudflare is in the business of improving the security and performance of websites and cloud connections. The company earned $0.16 per share on sales of $378.6 million in the first quarter, topping Wall Street expectations for $0.13 per share in earnings on sales of $373 million.

But the company’s guidance for the quarters to come raised questions for investors. Cloudflare expects second-quarter revenue to come in between $393.5 million and $394.5 million and full-year revenue of between $1.648 billion and $1.652 billion. That’s within Wall Street expectations, but the so-called “whisper numbers” of unofficial expectations were a lot higher.

Even if the company hits the high end of its revenue targets, it would still imply some slowing. Cloudflare is expecting to grow sales by about 27% in 2024, well below the company’s 41% compound annual growth rate since 2021.

Is Cloudflare stock a buy after its recent earnings report?

There’s nothing wrong with Cloudflare’s business. The company said the number of paying customers was up 17% year over year and the number of companies spending at least $100,000 annually on its services grew by 33%.

The issue is the rate of growth, and whether any slowdown is a reflection of short-term macroeconomic uncertainty or a longer-term issue at Cloudflare.

Investors won’t know for sure for at least a few quarters. But if nothing else the questions are taking some of the starch out of Cloudflare’s sky-high valuation earned during a period when the company was constantly exceeding whatever targets Wall Street assigned it.

Current holders have no reason to panic sell into this loss, but those interested in buying in should proceed cautiously until more is known about what the next few quarters will look like for Cloudflare.

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Lou Whiteman has positions in Cloudflare. The Motley Fool has positions in and recommends Cloudflare. The Motley Fool has a disclosure policy.