Cloudflare (NET) Stock Forecast & Price Target

Cloudflare has demonstrated robust growth, with a 31% year-over-year revenue increase to $562 million, exceeding management's guidance, while also achieving a 43% year-over-year rise in Remaining Performance Obligations (RPO), reflecting the highest growth rate since F4Q22. The company continues to expand its customer base, with a 33% year-over-year increase in paying customers, reaching approximately 296,000, and showing a strong trend with record additions of high-value clients. Additionally, improvements in net dollar retention rate (NDRR) to 119% and enhanced sales productivity signal effective execution and a positive trajectory for future financial performance.

The analysis indicates a negative outlook for Cloudflare's stock primarily due to uninspiring incremental profitability, with expectations that Street targets for 2026 could be downgraded. Margins are under pressure as evidenced by a decline in gross margins associated with a shift towards a higher mix of paid traffic, which has resulted in increased costs. Additionally, the current market environment appears unfavorable for high-growth companies, particularly those like Cloudflare that have elevated valuations, leading to heightened risks for investor sentiment and potentially lower stock performance.