Cloudflare's AI Push Sparks Analyst Optimism and Stock Surge

Bank of America double upgrades what it says is an underappreciated AI play

Cloudflare could emerge as "one of the true 'AI winners' in software," according to Bank of America. The bank issued a rare double upgrade, taking the cybersecurity company to buy from underperform. BofA's $160 per share price target, up from $60, calls for 29% upside moving forward. Analyst Madeline Brooks said two key catalysts, the company's "differentiated" approach on artificial intelligence and its ramping up of network security, as drivers for the stock's growth ahead. NET YTD mountain Cloudflare stock in 2025. "We place a high probability on Cloudflare becoming the leader in AI-as-a-Service (AIaaS), which we expect will be the AI consumption method of choice for Enterprises," Brooks said. The analyst said both the company's gains in AI and network security could grow Cloudflare's three-year compound annual growth rate to 30% by 2028. Her previous forecast called for 25%. "Cloudflare's network security offerings are showing strong momentum and capturing market share from competitors," She said. "According to our survey, network security products are currently 33% penetrated, with over 50% of new spending in the [next 12 months] expected to go to security products, replacing rivals such as CheckPoint and Cisco, as customers look to modernize network security with software solutions," Brooks added. Analysts are split on Cloudflare shares. LSEG shows that 14 of the 34 covering the stock rate it a buy or strong buy. Another 16 have a hold rating on it, while four assigned underperform and sell ratings on Cloudflare.

Cloudflare Stock Jumps as BofA Gives Rare Double Upgrade to 'True AI Winner'

Customers are increasingly opting for Cloudflare's AI-as-a-Service over offerings from hyperscalers like Amazon and Microsoft. Cloudflare (NET) shares jumped Tuesday after Bank of America analysts gave the stock a double upgrade, citing strong growth potential in artificial intelligence and security. The cybersecurity firm is "poised to be one of the true 'AI winners' in software," BofA said, projecting 30% growth by 2028 driven by "AI and security momentum." The bank upgraded the company to "buy" from "underperform" and raised its price target to $160 from $60. That implies roughly 23% upsides after shares of Cloudflare climbed more than 4% intraday to $129.60. Cloudflare's AI-as-a-Service represents a differentiated approach to artificial intelligence, BofA said, and one that customers are "increasingly choosing" over hyperscalers like Amazon (AMZN) Web Services, Oracle (ORCL) and Microsoft (MSFT) Azure. According to a BofA survey, Cloudflare customers are expected to increase their AI spending by an average of 8% over the next 12 months to about $100,000 per client. Last month, Cloudflare reported fourth-quarter results that beat analysts' expectations, driven in part by adding a record number of large customers in the period.

Cloudflare Analyst Turns Bullish On AI Momentum, Security Market Gains - Cloudflare (NYSE:NET)

BofA Securities analyst Madeline Brooks on Tuesday upgraded Cloudflare, Inc. NET from Underperform to Buy, raising the price forecast from $60 to $160. According to Brooks, Cloudflare has a strong potential to become a leader in AI-as-a-Service as enterprises prefer this method for AI consumption. The company is gaining traction in network security, particularly in SASE, as enterprises look to modernize their security solutions with software-based options. This momentum in AI and security is expected to drive a 30% compound annual growth rate over the next three years, up from the previous estimate of 25%. As a result, the analyst raises the price target for Cloudflare, based on a 20x multiple of its CY26 EV/Sales. Also Read: Alibaba's Tsai Sounds Alarm On Signs Of AI Bubble In US: 'People Are Building Data Centers On Speculation' The analyst also notes that customers are forecasting an 8% increase in AI spending, reaching $100k per customer, which will account for 15% of total customer spending. Additionally, Cloudflare is increasingly chosen over major hyperscalers like AWS, Oracle, and Azure due to its ease of use, scalability, and superior utilization benefits, Brooks adds. The analyst highlights that Cloudflare's network security products are gaining significant market share, with 33% penetration and more than 50% of new spending in the near term expected to be directed toward security solutions. Based on this momentum, Brooks is bullish that Cloudflare will meet or exceed its full-year revenue guidance. However, the analyst notes potential risks, including the company's target of $5 billion in revenue for 2028, which assumes a revenue reacceleration and growth that is about 400 basis points higher than the average peer group forecast. Achieving this goal will require near-perfect go-to-market execution, particularly with Enterprise customers, who have historically been a weaker segment for Cloudflare. Additionally, the analyst cautions that AI could take longer to contribute significantly to revenue, given the nascent stage of the market and the challenges around pricing strategies. Price Action: NET shares are trading higher by 2.4% to $126.91 at last check Tuesday. Read Next: China's DeepSeek Ups The Heat In OpenAI Rivalry, Upgrades V3 Model Improving Coding And Reasoning Capability Photo: T. Schneider/Shutterstock.com NETCloudflare Inc$126.912.40%Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full ScoreEdge RankingsMomentum91.86Growth81.87Quality-Value6.38Price TrendShortMediumLongOverview This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Market News and Data brought to you by Benzinga APIs

Cloudflare's Developer And AI Tools Fuel Long-Term Growth: Goldman Sachs Analyst Says - Cloudflare (NYSE:NET)

Goldman Sachs analyst Gabriela Borges maintained a Buy rating on Cloudflare, Inc NET on Wednesday with a price target of $161. Borges remarked that the key debates about Cloudflare today are how big the opportunity in AI inference is and how quickly this opportunity will ramp up. At the time of the analyst's upgrade on January 2, he estimated that Act III products (developer tools, compute, and storage for both classic compute and AI-enabled compute) were $80 million in ARR in 2024 and introduced a scenario in which ARR grows to $1.3 billion in 2030 (a 60% CAGR). Also Read: Cloudflare Drives Analyst Optimism With 'Speedboat' AI Initiatives, Sales Productivity Gains The CAGR is intended as a starting point estimate given the number of unknowns in sizing the AI inference TAM and Cloudflare's share within it. That said, one key indicator in Cloudflare's fourth-quarter 2024 earnings call directionally supports this ramp in the near term: capex. Specifically, Cloudflare guided capex to be 12-13% of revenue, or up ~40%, citing increased investment in its GPU rollout to support AI inference demand. At its Analyst Day, Cloudflare further disclosed that Act III's annual contract value (ACV) was up 76%, marking acceleration, and plans to double its capacity for global computing this year. Borges detailed limitations to using a capex-to-revenue ratio to forecast revenue, which makes precise forecasting challenging. Nonetheless, coupled with the analyst's broader fieldwork, Cloudflare is on track to double Act III ARR in 2025. Borges noted that Cloudflare is still in the first or second stage of this product cycle and that its technical differentiators will allow it to capture a meaningful share in this new profit pool. Borges projected fiscal 2025 revenue of $2.09 billion and EPS of $0.81. On Tuesday, BofA Securities analyst Madeline Brooks upgraded Cloudflare to Buy, raising the price target to $160, driven by AI-as-a-Service and network security growth. Price Action: NET stock closed lower by 4.98% to $121.15 on Wednesday. Also Read: Buy Cloudflare Or Sell? Analysts Vary Over Sales Acceleration And Business Momentum Photo: T. Schneider via Shutterstock NETCloudflare Inc$121.43-4.76%Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full ScoreEdge RankingsMomentum92.26Growth81.84Quality-Value6.33Price TrendShortMediumLongOverviewMarket News and Data brought to you by Benzinga APIs

Why Cloudflare Stock Popped on Tuesday | The Motley Fool

Curiously, BofA upgraded Cloudflare, which is often thought of primarily as a cybersecurity stock, for another reason entirely: BofA likes Cloudflare's artificial intelligence (AI) business. Cloudflare doesn't break its business out among separate segments when reporting earnings. As a result, historically, many investors have considered the company a cybersecurity stock -- which is no surprise. Street Insider notes the company's security products already have 33% market penetration. But as my colleague Harsh Chauhan pointed out last month, while Cloudflare does offer a content delivery network (CDN) that secures internet connections, over the past year and a half, it also has been deploying graphics processing units (GPUs) across its network that enable Cloudflare customers to run AI workloads in the cloud. In other words, as time goes on, cybersecurity stock Cloudflare is becoming more and more an AI stock. BofA believes Cloudflare's AI-as-a-service offering "is already resonating with customers," and has become "the leading product Cloudflare customers are looking to adopt in the next twelve months." Predicting Cloudflare is now on track to meet or exceed full-year revenue guidance, and arguing the company could grow as fast as 30% annually over the next three years, BofA isn't just upgrading the stock. It's nearly tripling its price target to $160 a share. S&P Global Market Intelligence data show Cloudflare has maintained a 36.5% average annual revenue growth rate over the last three years. While not yet profitable under generally accepted accounting principles (GAAP), the company did generate $166.5 million (after deducting capital expenditures and capitalized software costs) last year. That's pretty impressive. Still, at a $44.8 billion market capitalization, it means Cloudflare stock trades for a nosebleed 269 times trailing free cash flow, and 194 times projected 2025 FCF. Even with a 30% growth rate, that seems too expensive to me.

Cloudflare shares leap as BofA double-upgrades to Buy By Investing.com

Investing.com -- Bank of America (NYSE:BAC) (BofA) analysts double-upgraded Cloudflare (NYSE:NET) to Buy from Underperform on Tuesday, a move driven by the company's improving fundamentals and significant growth potential in AI and network security. The company's shares jumped more than 5% in premarket trading Tuesday. The Wall Street firm's analysts highlighted two main catalysts that they believe will accelerate the company's growth: Cloudflare's differentiated approach to AI and its momentum in network security, particularly in Secure Access Service Edge (SASE). Cloudflare's AI-as-a-Service (AIaaS) offering is expected to become the preferred method of AI consumption for enterprises, positioning the company as a potential leader in this space. "AIaaS is already resonating with customers; our surveys show AI is the leading product Cloudflare customers are looking to adopt in the next twelve months (NTM), with average AI spending forecast to increase +8% to $100k per customer, or 15% of total customer spending," BofA analysts led by Madeline Brooks said in a note. In the network security sector, Cloudflare is demonstrating strong momentum and continues to gain market share from competitors, especially in the Secure Access Service Edge (SASE) segment. The company's security products have reached 33% market penetration, and over half of new spending in the NTM is expected to be directed towards security products. This trend is likely to challenge incumbents such as Check Point Software (NASDAQ:CHKP) and Cisco (NASDAQ:CSCO) as enterprises transition to software-based security solutions. "Given recent momentum, we are increasingly confident in NET's ability to meet or exceed full-year (FY) revenue guidance," analysts continued. Alongside the upgrade, BofA significantly raised its price objective for Cloudflare stock to $160 from $60, applying a 20x multiple on calendar year 2026 estimated enterprise value to sales, up from a 10x multiple previously. The analysts project that these developments could propel Cloudflare's 3-year compound annual growth rate (CAGR) to 30% by 2028, up from the previous estimate of 25%. While very bullish on NET, BofA also outlined potential risks to their thesis. The bank notes that achieving Cloudflare's target of $5 billion in revenue by calendar year 2028 would require a reacceleration of revenue growth, which is roughly 400 basis points higher than peer group growth forecasts. This ambitious goal demands "near-perfect go-to-market execution," especially among enterprise customers. Moreover, the nascent state of the AI market and pricing strategies may delay AI's material contribution to Cloudflare's revenues, BofA said.