Cloudflare stock rallies as Wall Street warms to its AI pitch

A growth stock rally always looks like math from a distance and psychology up close. Cloudflare’s earnings report landed, the stock ripped, and upgrades arrived in a tidy cluster, as if Wall Street had been waiting for a single clean moment to agree on what Cloudflare is worth in an AI-shaped internet.

That “moment” came with a familiar set of receipts: fourth-quarter revenue of $614.5 million (up about 34% year over year) and a 2026 revenue outlook (of $2.79 billion to $2.80 billion) that came in ahead of expectations, which is the fastest way to turn “maybe slowing” into “reaccelerating” in the market’s group chat.

But what seemed to really juice the reaction was the enterprise signal: Cloudflare highlighted a record annual contract value deal (averaging $42.5 million per year) and said total new ACV grew nearly 50% year over year — the kind of detail that makes “internet plumbing” sound like a toll road, not a commodity. 

The stock jumped about 10% in Wednesday morning trading.

You can feel the market’s tension in the timing. Cloudflare entered earnings with a stock that had already been acting like an idea: the “AI picks-and-shovels” trade migrating from chips into the plumbing of the web. Earnings gave the idea a quarterly stamp, and the stock’s post-print move turned that stamp into a parade. 

The agentic internet needs a traffic cop

Cloudflare’s AI angle works because it doesn’t require it to “win” at building a model. It just needs the web to change shape.

Cloudflare’s AI narrative right now is essentially the “agentic” internet — the idea that the next big wave of web traffic won’t be humans doomscrolling, but software talking to software: bots, agents, automated queries, and machine-to-machine work that still needs to be routed, secured, and accelerated. Cloudflare’s pitch is that it already sits in the stream of that traffic, selling the shovels — and the company is increasingly charging like it knows it. 

In an AI-agent world, the web gets busier in a different way: more machine-to-machine requests, more automated scraping and retrieval, more software acting like a user. Some analysts have framed Cloudflare as the control layer for that non-human traffic at scale, and the company’s commentary leaned hard in that same direction.

Management tied demand to the rise of AI agents and automated traffic — software browsing, querying, buying, scraping, and working on behalf of humans. If that’s where the web is headed, Cloudflare looks like a control layer: routing, security, and performance for a messier, more machine-driven internet.

Investors didn’t react like they’d heard a guidance tweak. They reacted like they’d been handed a fresh way to justify a premium multiple: Cloudflare as critical infrastructure for an automated web, with the pricing power to match.

Bulls, bears, and price tags

The quarter gave investors evidence that the story isn’t just a tech-conference slide. Baird upgraded the stock to Outperform from Neutral and pushed its price target higher, saying that the quarter “marked the strongest confirmation yet that multiple growth vectors are now compounding simultaneously” — backlog improving, big deals landing, go-to-market execution tightening. William Blair analyst Jonathan Ho said AI lets traffic pull from “a much larger number of sites,” and Cloudflare sits in the path of that behavior.

The broader choreography was familiar: targets rising, optimism tightening, and the herd trying not to be the last one explaining why it missed the re-rate.

Barclays raised its target to $250 and stayed Overweight. RBC Capital Markets nudged its target to $240 while keeping Outperform. TD Cowen reiterated Buy with a $265 target. KeyBanc Capital Markets reiterated Overweight and pointed to a $300 target. Citizens Financial Group held Market Outperform at $270. UBS lifted its target to $220 with a Neutral rating. Piper Sandler raised its target to $222 and stayed Neutral. Cantor Fitzgerald kept Neutral at $224.

That’s an “across-the-board” step forward that gave bulls confidence to press the case; Cloudflare could be well-positioned if AI-driven traffic becomes a structural feature of the web rather than a novelty.

Still, even in a celebration quarter, the market kept one eyebrow raised. Cloudflare told investors to expect more sales than they’d penciled in, then asked them to be a little less greedy on profit — a sign the company still plans to spend into the moment, not harvest it all at once, which is fine until it isn’t. And a November outage that rattled customer confidence still hangs over the story, an inconvenient footnote when you’re asking investors to treat your network as critical infrastructure for a more automated internet.

A rally that only attracts cheerleaders tends to be short-lived. Morgan Stanley $MS kept an Overweight rating while trimming its target to $245. Scotiabank cut to $225 and kept Sector Perform. Jefferies lifted its target to $225 and kept Hold. Guggenheim Securities raised its target to $140 and kept Sell. That spread is the story in miniature: fewer debates about whether Cloudflare is “real,” more debate about how much of the future the stock already pulled into the present.

Cloudflare delivered a quarter that made the AI-infrastructure story easier for big money to own — and easier for analysts to defend on paper. The upgrades were the chorus, but the real hook was the market deciding, for at least one clean moment, that Cloudflare stopped being “a pricey security name” and started being priced like a control layer for whatever the internet becomes when more of its users are machine — that Cloudflare belongs on the short list of companies that get paid when the internet’s next users arrive, and they happen to be bots.