Kyle Reidhead
CEO & Analyst of Milk Road/Milk Road AI
Cloudflare's Workers adoption and AI-agent traffic growth support staying long for much longer, though the stock is expensive now. More than 10 million developers build on Workers, up from 7.4 million the prior quarter, while daily AI-agent requests on its network rose over 1,700% in a year. x.comÂ
Cloudflare has three AI-driven trends working in its favor. AI will uncover more vulnerabilities; protection against more AI bots, agents and crawlers is needed; and its developer platform, including Workers, is becoming the default for agent-related development. CrowdStrike is not a favorite. 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 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's 20% workforce cut reflects AI doing the work of 1,100 employees, not a failing business, so margins are about to explode. It beat on EPS and revenue and raised full-year guidance, with revenue up 34% and billings up 37.8%, and holds $4.16 billion of cash. The 18% post-earnings drop misses that it is building the infrastructure every AI agent on the planet will run through. x.comÂ
Cloudflare's edge is a real AI-crawl chokepoint, but the price is the problem. FedRAMP High clearance on August 10 opens federal national-security workloads, and since traffic transits its edge, pay-per-crawl and bot rules are enforced there. Q2 revenue of $696M rose 36%, confirming the thesis without changing it. At 40x EV/sales, 182x forward earnings and a -8% GAAP operating margin, a de-rating needs no bad news; adding waits for ~$268. Direct lab-publisher licensing could bypass the toll. … Show more
Cloudflare may be the strongest software play on agentic AI in the public markets. x.comÂ
Cloudflare may be one of the best picks-and-shovels winners of agentic AI, with AI bot traffic on pace to surpass human internet traffic by 2027. If agents hit thousands of sites for a single task, the companies managing that load, routing the traffic and securing the internet stack stand to capture enormous value. x.comÂ
Cloudflare is difficult to buy at about 30x EV/sales because a lot is already priced in, even after a good quarter. Q1 revenue rose 34% to $640 million versus $623 million expected and EPS of $0.25 beat, with strong AI and agentic traction, but remaining performance obligations of $2.54 billion fell short of the roughly $2.61 billion expected. It also announced a 20% workforce reduction. x.comÂ
Cloudflare's AI-driven network demand is accelerating results, confirming its role as infrastructure for the agent era. It raised 2026 adjusted EPS guidance to $1.25-1.26 from $1.19-1.20, above the $1.20 consensus, showing its May shift to AI-first operations with a one-fifth layoff did not hurt growth. CEO Matthew Prince says the internet is being rebuilt for machine-to-machine traffic. AI can replace many things, but it needs Cloudflare's global CDN. x.comÂ