What Sent Cloudflare Stock Higher?

Cloudflare (NET) stock heavily outpaced the broader market this year, returning 87.6% in the nine months to October 7, 2026, while the S&P 500 returned 13.0%. That momentum coincided with a series of announcements and a second-quarter report on August 6 that firmly linked the company to the rise of AI agents. So what did Cloudflare tell investors?

Cloudflare Kept Pointing Investors To AI Agents

On July 1, 2026, Cloudflare announced new analytics and commercial partnerships between site owners and AI companies, built for what it calls the agentic Internet. Management noted on the August 6 call that automated software, not people, sent more than 50% of the traffic on Cloudflare’s network in the second quarter. That marked a first for the company.

During the same presentation, management highlighted another quarter of rapid growth in Workers, its platform for software developers, alongside the increasing work AI agents do across its network. Overall revenue for the quarter reached $696.1 million, up 36% from a year earlier. Yet the company declined to provide a specific revenue figure for Workers, saying only that the platform had become a meaningful contributor.

The momentum extended beyond earnings season. Cloudflare’s shares rose about 9% in morning trading on September 9, 2026, following news of a security partnership with OpenAI. A news report at the time noted that investors treated the tie-in as validation of Cloudflare’s positioning with AI agents. That September rally kicked off a multi-week advance that was further fueled in early October by a European enterprise expansion deal with Deutsche Telekom and a BTIG price-target boost to $413, lifting the stock to a fresh 52-week high of $370.35 on October 6 and cementing a 21% gain over the month to October 7 (versus 1.8% for the S&P 500).

Cloudflare Grew Its Revenue By A Third

The company is also seeing its top-line growth accelerate. Cloudflare’s revenue reached $2.5 billion over the last twelve months, up from $1.9 billion a year earlier. The pace of that expansion has picked up: revenue rose 33.5% over those twelve months, compared to 27.3% in the twelve months before.

Management expects a similar pace for the full year. The company guided 2026 revenue to a range of $2.864 billion to $2.870 billion, an increase of 32%.

With sales growing by about a third over the last twelve months, the stock returned 87.6% in the nine months to October 7. Shareholders now pay 48.4 times Cloudflare’s sales, against 3.1 times for the S&P 500. At that multiple, the market values the company at $121.3 billion.

Cloudflare’s Operations Are Still In The Red

Despite the revenue surge, profitability remains elusive. Cloudflare posted an operating loss of 8.1% of revenue over the last twelve months, trailing the S&P 500, which earned an operating margin of 18.5%. Still, Cloudflare has managed to narrow that loss every year. The deficit stood at 17.7% of revenue three years ago, fell to 11.6% two years ago, and hit 9.9% a year ago.

At the same time, Cloudflare’s gross margin has fallen to 73% over the last twelve months from 76% a year earlier. Management noted on the August 6 call that it expects gross margin to stabilize around its current level.

Ultimately, the impressive rise in the stock did not change the underlying loss or the lower gross margin. Cloudflare’s growth has not yet turned into profit: its twelve-month operating margin is still below zero. Management said that without $151 million of second-quarter restructuring charges, the GAAP net loss would have been around $18 million.

Does This Mean You Should Act On NET?

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