Cloudflare (NET) Valuation Check After Outage Concerns And Sector Wide Technology Pullback

Why Cloudflare’s recent outage and sector jitters matter for NET

Cloudflare (NET) has been caught in a sector wide pullback, with sentiment pressured by a multi hour outage tied to an internal configuration error and wider worries about tariffs and AI related disruption.

See our latest analysis for Cloudflare.

That outage and tariff driven sell off have come after a tougher few months, with a 7 day share price return of 10.26% and a 90 day share price return of 12.79%. Even so, the 1 year total shareholder return sits at 18.55%, and the 3 year total shareholder return is close to 3x. This combination signals that short term momentum has faded, while longer term holders are still ahead.

If Cloudflare’s swings have you rethinking how AI reshapes security and infrastructure, it could be a good time to scan 33 AI infrastructure stocks as potential next ideas on your list.

With NET down over the past month but still showing a 1 year total return of 18.55% and a 3 year return close to 2x, is this recent weakness a genuine opening, or are investors already paying for years of future growth?

Most Popular Narrative: 26.2% Undervalued

Cloudflare’s most followed narrative pins fair value at about $232.78 per share, above the last close of $171.80, which sets up an interesting tension between model and market.

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, which is 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.

Read the complete narrative.

Curious what earnings trajectory and margin shift sit behind that fair value, and how long they are assumed to last? The narrative leans on high growth, rising profitability, and a rich future earnings multiple that is usually reserved for market favorites. If you want to see how all those moving parts fit together, the full story is worth a closer read.

Result: Fair Value of $232.78 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this hinges on large enterprise customers staying engaged and on newer AI and Act 4 products finding clear, profitable monetization rather than dragging on margins.

Find out about the key risks to this Cloudflare narrative.

Another view on what the market is paying for NET

That fair value of $232.78 from the narrative sits awkwardly next to how the market is pricing Cloudflare on sales. At about $171.80, the stock trades on a P/S ratio of 27.9x, compared with 12.4x for peers, 2.1x for the wider US IT industry, and a fair ratio estimate of 12.8x. In plain terms, investors are already paying a hefty premium, which could amplify both upside and downside if expectations shift.

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

If this mix of optimism and caution around Cloudflare has you on the fence, it is worth checking the numbers yourself and acting while sentiment is still split. You can start with 1 key reward and 1 important warning sign to see how the key risks and rewards stack up side by side.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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