Sam Badawi
Stock Analyst, Creator of Origins of Alpha & Quarterly Conviction
Cloudflare is one of the names leading this market and likely to lead the next leg higher, as an emerging leader in data inference and a core piece of internet DNS infrastructure. That positioning helped it avoid sustained weakness like its 81% drawdown in 2022 and 50% pullback in April 2025. With the market within 3% of all-time highs, there is little reason to bottom fish in names still down 50%+, though Cloudflare remains very expensive. x.com x.comÂ
Cloudflare's importance becomes clearest during outages, when disruption exposes how much of the internet depends on its platform. That dependence makes the stock hard to sell despite its obscene valuation. x.comÂ
Cloudflare deserves its premium multiple far more than CrowdStrike does. Cloudflare is growing about 40% against CrowdStrike's mid-20s, and it adds a call option on agentic expansion. Both trade at nosebleed valuations. x.comÂ
Cloudflare at 38x NTM revenue and 150x NTM EBITDA is insane, so a decent return from here is unlikely even though it is the leader. That has never happened before without massive acceleration in growth rates and margin expansion. x.comÂ
Cloudflare looks attractive as more AI agents bring more traffic for it to route, secure and bill. Its recent dips have reversed, while the agent-driven traffic opportunity is the business case. x.comÂ
Cloudflare is trying to make its network the control layer for more internet and AI traffic, not sell one more point product. Its CDN already sits close to users and applications on a global edge, a natural place to add security, Zero Trust, developer compute and AI controls such as Workers AI. Q1 2026 supports this: revenue up 33.5%, $2.54B of RPO and 118% net retention. The case holds if consolidation keeps showing up in adoption; the main risks are valuation and execution. x.comÂ
Cloudflare's valuation, about 28.5x EV/ARR and 453x run-rate GAAP EBIT, leaves little room for its competitive risks. Its SASE and developer-platform businesses face Zscaler, Palo Alto and hyperscalers with far bigger budgets, and OpenAI and Anthropic may keep inference on their own backends. The bull case is crisp and arguably priced in: bot security and edge workloads matter more as agents spread, growth sped up from 27% to 34%, and weekly agent requests doubled in January. x.comÂ
Cloudflare's Q2 beat-and-raise shows growth holding above 35% as it becomes an AI-era platform for networking, security, edge computing and agent infrastructure. Revenue rose 36% to $696M versus $666M expected, current RPO grew 35%, and full-year revenue guidance rose again to $2.86-2.87B. Its CEO says traffic is shifting toward AI-to-AI and agent-to-agent interaction. Non-GAAP gross margin fell 320 bps to 73.1% and layoff charges drove a GAAP loss, but neither affects cash flow or guidance. … Show more
Cloudflare is a top-rated software play, with four big UGs this year and a new contract last week. On the chart it printed a bullish engulfing candle at its 50-day moving average, and its STL is in a new uptrend. x.comÂ
Cloudflare is the kind of name worth shorting: software stocks have been legitimately weak with moats in question, and some, like Cloudflare, still carry premium multiples. Cheap can get cheaper, as Duolingo fell from $520 to $250 and then to $90. Shorting hot momentum names like SanDisk or Applied Optoelectronics makes far less sense. x.com x.comÂ
Cloudflare's chart is making higher highs and higher lows, consistent with strong whale accumulation now at 98.14%. x.comÂ
