From what I know* (heavy on the asterisk there), they are. I'm guessing at their setup at this point, but it sounds like the "large" data is probably being stored (while encrypted) in a different way / separately than the messaging. Since it's supposedly E2E (not gonna pretend I've hand verified it), it's decrypted on the device, but it needs to be grabbed in the first place from said separate place.

So, I'm guessing the images are encrypted where they're stored. And from his post it sounds like it doesn't happen with the messages, so the motivation for using CloudFlare probably is around egress pricing, or they could be using CloudFlare R2 for storage as well.