Bill 'Latency Lord' Brennan
Fundamental Growth Investor, B2B/Sector Leaders & Picks-and-Shovels
Cloudflare is not undervalued, and calling it so is dumb. The only time it was more overvalued was the 2020-2022 SaaS bubble, and even then management was guiding to 50%+ revenue growth for the foreseeable future, which proved wrong. @zachtratar argues the opposite, that the market overreacted and Cloudflare is AI and internet infrastructure that AI does not threaten. x.comÂ
Cloudflare's stock price is far beyond what the company can ever pay back to shareholders. Even if free cash flow quadrupled next year to $250 million, or reached $1 billion annually, investors would only earn back their investment around 2106. SpaceX conceivably offers more optionality through Starlink. x.comÂ
Cloudflare's roughly $100 billion valuation is hard to justify because it is unclear how shareholders make money at this price. A post the author replies to calls it an amazing company and product at nosebleed multiples; another notes it converts only about 30% of revenue into cash, and stock-based compensation makes that worse. Positive EPS alongside negative net income reflects non-GAAP versus GAAP figures. x.com x.com 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 has never needed to break even because investors keep funding it. In business since 2009, it still runs a -10% operating margin, sustained by fund managers buying the new stock it issues every quarter, equal to 18% of revenue. It still trades at 31x 2026 revenue despite a supposed SaaS bear market. x.com x.comÂ
Cloudflare cannot justify a bullish view at a 10000x revenue valuation. 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'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 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 is a key enabler of agentic AI and has been overly punished in the software selloff, setting up a 2026 re-rating. It supports OpenClaw, the self-hosted autonomous agent popular since February, as it shifts toward autonomous AI workflows. Paying customers rose 40%, yet only about 1% of 25 million websites pay, and it signed a landmark $130 million contract. Relative strength versus the software ETF and a 30%+ rally after washouts below the 200-day average point the same way. x.comÂ
Cloudflare's valuation leaves almost no return even under generous assumptions, so buyers at $330 risk being patsies. If it grows 15% every year through 2041, with non-GAAP margins rising to 50% and a 6% terminal value, the stock would compound at only about 0.6% a year. x.comÂ