Cloudflare (NET) AI Stock Analysis

Cloudflare

(BMV:NET)

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Positive Factors

Strong Revenue and Customer ExpansionRapid revenue growth alongside expansion in large enterprise customers indicates broadening adoption across Cloudflare’s platform. A growing enterprise base can improve recurring revenue durability, increase cross-selling opportunities, and strengthen the company’s competitive position over the next several quarters.

Negative Factors

Persistent GAAP LossesPersistent GAAP losses show that Cloudflare has not yet established durable bottom-line profitability, even as revenue scales. Continued losses can constrain internal capital formation, increase dependence on non-GAAP adjustments, and make execution on the path to sustainable earnings especially important.

Cloudflare (NET) vs. SPDR S&P 500 ETF (SPY)

Market Cap: MXN 99.95B
Dividend Yield: ―
Average Volume (3M): 523
Price to Earnings (P/E): -481.4
Beta (1Y): -0.08
Revenue Growth: 21.24%
EPS Growth: -51.95%
Country: Mexico
Employees: 5,156
Sector: Technology
Sector Strength: 61
Industry: Software - Infrastructure

Cloudflare Business Overview & Revenue Model

Company Description

Cloudflare, Inc. functions as a global provider of cloud-based services. The company delivers a comprehensive, integrated cloud security platform designed to safeguard a diverse array of digital environments, encompassing public and private clouds, o...

Cloudflare Earnings Call Summary

Earnings Call Date:Aug 05, 2026(Q2-2026)|% Change Since:7.26%|Next Earnings Date:Nov 04, 2026

Earnings Call SentimentPositive

The call conveyed strong business momentum: double‑digit top-line growth (+36% YoY), expanding large-customer base, 120% dollar-based net retention, outsized developer and paying-customer acquisition, record bookings/pipeline acceleration, meaningful free cash flow and substantial enterprise wins. Management also laid out a confident outlook with robust guidance. Key negatives include a meaningful year-over-year gross margin decline (320 bps), sizable restructuring and severance charges (Q2: $151M; FY up to $165M), increased network CapEx expectations and added forecasting variability from new consumption and pool-of-funds contract structures. Overall, the positives — product adoption, customer expansion, cash generation and positioning for agentic AI — materially outweigh the near-term margin and one-time cost challenges.

Positive Updates

Strong Revenue Growth

Total revenue of $696.1 million, up 36% year-over-year, demonstrating robust top-line momentum.

Negative Updates

Gross Margin Pressure Year‑over‑Year

Gross margin was 73.1%, which improved sequentially by 30 basis points (first sequential improvement in 8 quarters) but declined 320 basis points year-over-year. Management cited increased allocation of network costs driven by paid vs free traffic as a headwind.

Company Guidance

Cloudflare guided Q3 2026 revenue of $736–737 million (up ~31% YoY), operating income of $129–130 million, an effective tax rate of 20%, and diluted EPS of $0.34 (assuming ~374 million shares outstanding); for full‑year 2026 it expects revenue of $2.864–2.870 billion (up ~32% YoY), operating income of $443–445 million, a 20% tax rate, and diluted EPS of $1.25–1.26 (≈374M shares). Management also reiterated full‑year network CapEx of ~14–15% of revenue (Q2 was 7%), forecast severance and other restructuring charges up to $165 million (up to $130M cash), and said that excluding the higher restructuring impact its free cash flow expectations for 2026 remain unchanged.

Cloudflare Risk Analysis

Cloudflare disclosed 86 risk factors in its most recent earnings report. Cloudflare reported the most risks in the "Finance & Corporate" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added

3 New Risks

1.If the Capitalization Changes are implemented, it will affect the relative voting power of our outstanding shares of capital stock.Q2, 2026

2.If the Class C Split occurs, it would affect the market price of our outstanding shares of Class A common stock and Class C common stock.Q2, 2026

3.Any issuance of additional shares of Class C common stock by us or dispositions of shares of Class C common stock by significant or other stockholders may serve to further increase market activity in the shares of Class C common stock relative to the shares of Class A common stock.Q2, 2026

Cloudflare Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

MX:NET against its peers
Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ZS	78Outperform	$38.78B	-609.82	-2.76%	―	25.42%	-47.39%
PANW	73Outperform	$299.56B	795.37	1.68%	―	24.49%	-68.55%
FTNT	72Outperform	$99.84B	43.90	151.52%	―	20.23%	26.26%
FFIV	70Outperform	$19.16B	26.68	19.19%	―	10.64%	6.01%
Sector *	61Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
AKAM	61Neutral	$13.33B	32.65	8.49%	―	5.87%	-0.31%

* Technology Sector Average

Performance Comparison

MX:NET and its peers over the selected period
Ticker	Company Name	Price	Change	% Change
MX:NET	Cloudflare Inc	5235.00	855.00	19.52%
AKAM	Akamai Technologies	92.72	20.75	28.83%
FFIV	F5, Inc.	338.34	96.96	40.17%
FTNT	Fortinet	136.08	50.86	59.68%
PANW	Palo Alto Networks	365.87	151.35	70.55%
ZS	Zscaler	237.83	-90.47	-27.56%

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.

Cloudflare AI Stock Analysis