Last Update 30 Nov 25

Fair value Increased 1.30%

NET: Surging AI Momentum And Enterprise Expansion Will Drive Shareholder Value

Cloudflare’s fair value estimate has been raised by analysts from $239.35 to $242.46 per share, as recent price target increases across the Street reflect ongoing AI-driven momentum, solid revenue growth, and expanding enterprise adoption despite recent operational risks.

Analyst Commentary

Recent Street research continues to highlight the shifting landscape for Cloudflare, with analysts showing confidence in the company’s trajectory while also identifying areas of caution. The following sections summarize the key analyst perspectives shaping sentiment and valuation outlooks for Cloudflare.

Bullish Takeaways

Bullish analysts are raising price targets on Cloudflare, citing robust Q3 results with revenue growth accelerating to over 30% for the first time in more than a year. This is bolstering confidence in both near- and long-term execution.
Expansion in large enterprise adoption, particularly among customers in the $1M-$5M cohort, is energizing the positive outlook as Cloudflare successfully drives deeper product penetration and leverages momentum across AI, security, and next-generation networking services.
Key growth vectors, including SASE, Zero-Trust, and AI inference products, are seen as giving Cloudflare a unique position at the intersection of cybersecurity and emerging internet infrastructure opportunities.
Several analysts believe that Cloudflare’s operational resilience and effective go-to-market execution are providing a solid foundation for continued upward revisions to future financial targets, especially in light of ambitions for a $3 billion run-rate by 2026.

Bearish Takeaways

Bearish analysts caution that despite rapid growth, some field research has shown limited evidence of customer adoption in certain emerging product categories, such as SASE and edge computing. This signals potential hurdles to broader expansion.
Recent service outages have introduced reputational risks and highlighted Cloudflare’s dependency on major infrastructure providers. However, most view the long-term impact as limited.
There are ongoing concerns about a more balanced risk-reward dynamic following Cloudflare’s recent rally, with some expecting that future execution will need to closely track elevated expectations to sustain valuation gains.

What's in the News

Cloudflare states there is no evidence of a cyberattack linked to the recent outage. The company addressed speculation and aimed to reassure customers and partners (Bloomberg).
Truist raised its price target for Cloudflare shares to $275 from $230, citing strong Q3 results, expanding enterprise adoption, and unique positioning in AI, security, and next-generation web infrastructure (Truist research note).
Cloudflare provided earnings guidance for Q4 and full year 2025, expecting total revenue to reach approximately $589 million for the quarter and $2.14 billion for the year. This guidance represents a 28% year-over-year increase.
Cloudflare announced industry-leading partnerships with Visa, Mastercard, and American Express to develop authentication protocols, enabling secure agentic commerce and advancing the development of AI-driven shopping experiences.
The company introduced new solution bundles for its channel partners and expanded its PowerUP Partner Program to help businesses better secure and manage applications across multi-cloud environments.

Valuation Changes

Fair Value Estimate has risen slightly, now $242.46 per share compared to the prior $239.35 per share.
Discount Rate increased marginally from 9.07% to 9.07%, reflecting minimal change in perceived risk.
Revenue Growth projection edged up, now 27.63% compared to the earlier 27.61% estimate.
Net Profit Margin widened modestly from 12.72% to 12.75%.
Future Price/Earnings (P/E) ratio has dipped slightly, moving from 217.10x to 215.82x.

Strong demand for cloud-native security and resilient infrastructure, with expanding high-value partnerships and rising adoption of zero-trust, is driving long-term growth and customer retention.
Operational efficiencies, cross-selling, and innovation initiatives are improving profitability and margin outlook while unlocking new, high-margin business opportunities.
Customer concentration, regulatory shifts, margin pressure, competition, and uncertain new monetization threaten earnings stability and long-term growth prospects.

Catalysts

About Cloudflare

Operates as a cloud services provider that delivers a range of services to businesses worldwide.What are the underlying business or industry changes driving this perspective?

The accelerating adoption of AI, explosion in global web traffic, and proliferation of IoT devices are driving increased demand for fast, secure, and resilient cloud-native infrastructure-Cloudflare's core strength-evidenced by strategic partnerships with major AI companies and record-breaking DDoS mitigation, positioning the company for sustained top-line revenue growth and strengthening customer retention.
Customers' heightened focus on cybersecurity, resilience, and zero-trust architectures-amplified by regulatory pressure and repeated security threats-continues to benefit Cloudflare, as shown by multi-year expansions with financial services and government clients and growing adoption of SASE/Zero Trust offerings, supporting higher average revenue per account and reduced churn.
Ongoing expansion and cross-selling of Cloudflare's platform, especially through high-value pool-of-funds and multi-product deals, have led to increasing penetration into large enterprises, all-time-high net sales productivity, and a rising proportion of revenue from large customers, with these trends likely to accelerate both revenue and earnings growth.
Investments in platform scalability, automation, and operational efficiency are resulting in improved net margins and operating leverage; gross margins remain healthy despite competitive pricing, and continued cost management is reducing operating expenses as a percentage of revenue, supporting long-term profitability improvements.
Cloudflare's early action building strategic positioning around the emerging Agentic Web and "Act 4" initiatives, leveraging its unique reach across 20% of the Internet and broad AI partnerships, offers significant optionality for new high-margin transaction-based business models that could unlock new revenue streams and expand the addressable market.

Cloudflare Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Cloudflare's revenue will grow by 26.5% annually over the next 3 years.
Analysts assume that profit margins will increase from -6.2% today to 4.6% in 3 years time.
Analysts expect earnings to reach $176.4 million (and earnings per share of $0.47) by about September 2028, up from $-117.1 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 557.5x on those 2028 earnings, up from -672.7x today. This future PE is greater than the current PE for the US IT industry at 29.3x.
Analysts expect the number of shares outstanding to grow by 1.54% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.92%, as per the Simply Wall St company report.

Cloudflare Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Heavy reliance on large enterprise customers, particularly pool-of-funds deals and variable revenue, increases customer concentration risk; any major client loss, failed renewal, or hyperscaler win could cause outsized swings in revenue, compressing earnings stability.
A steep and broad shift to stricter data privacy regulations (e.g., global data localization, new AI content licensing) or internet fragmentation ("splinternet") could require significant restructuring of Cloudflare's architecture, resulting in higher operational costs and potential limitations on cross-border scalability, impacting both net margins and addressable market size.
Gross margins are showing sequential and year-over-year decline (down 80bps QoQ and 270bps YoY this quarter), and ongoing investments in R&D and network expansion-while needed for growth and product innovation-may persistently pressure net margins and delay meaningful profitability.
Intense competition from hyperscale cloud providers (e.g., AWS, Azure, Google Cloud increasingly bundling networking/security features) and pricing pressure in the CDN and security markets could erode Cloudflare's differentiation, limit the ability to maintain "land and expand" motion, and compress long-term revenue growth.
Lack of clear monetization model and uncertain revenue potential for new "Act 4" and AI-related initiatives introduces execution risk; failure to establish a scalable and defensible business model in the AI/content transaction ecosystem may undermine growth expectations and weaken future earnings streams.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $209.009 for Cloudflare based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $255.0, and the most bearish reporting a price target of just $90.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.8 billion, earnings will come to $176.4 million, and it would be trading on a PE ratio of 557.5x, assuming you use a discount rate of 8.9%.
Given the current share price of $226.01, the analyst price target of $209.01 is 8.1% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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