The AI boom has boosted Cloudflare, sending its stock soaring. Is this the end of the “software apocalypse”?
Cloudflare "is at the center of a fundamental restructuring of the internet to accommodate machine-to-machine traffic," says the company's CEO
Cloudflare Shares Soared After a Strong Earnings Report and a Confident Outlook / Photo: rblfmr / Shutterstock
The updated full-year revenue forecast for Cloudflare, a cloud provider and cybersecurity service provider, exceeded Wall Street’s expectations. The company raised its forecast on the back of strong quarterly results, anticipating that the rapid proliferation of AI agents will continue to drive traffic on its network, Reuters reports.
This led to a rise of more than 16% in Cloudflare's stock price during premarket trading on August 7.
The race to develop and scale AI agents has led an increasing number of companies to rely on Cloudflare’s network infrastructure to securely route traffic and operate these tools, which has boosted demand for its cloud and security products, Reuters notes.
What the company disclosed in its report
Cloudflare raised its annual revenue forecast to a range of $2.86 billion to $2.87 billion, up from the previous range of $2.805 billion to $2.813 billion. This figure exceeded analysts’ average forecast of $2.81 billion, according to LSEG data, Reuters reports.
The company’s revenue for the second quarter, which ended on June 30, rose 36% year-over-year to $696.1 million. Analysts had expected quarterly revenue of $665.5 million for this period, according to the agency. For the third—current—quarter, the company forecasts revenue in the range of $736 million to $737 million, while analysts had expected $722.1 million.
Adjusted earnings for the second quarter were $0.29 per share, compared with Wall Street’s expectation of $0.27 per share. Cloudflare also raised its full-year adjusted earnings guidance to $1.25–$1.26 per share from the previous range of $1.19–$1.20.
““As the internet shifts toward AI-powered search systems and commerce based on AI agents, we are witnessing a fundamental restructuring of the internet to accommodate machine-to-machine traffic (communication between AI programs and other systems),” said Matthew Prince, Cloudflare’s CEO, commenting on the company’s results. According to him, Cloudflare “is at the center of this paradigm shift, building the infrastructure, governance mechanisms, developer tools, and billing systems for the agent-driven internet.”
What's happening with Cloudflare stock?
Following the release of its quarterly report, the company’s stock rose more than 16% in premarket trading on August 7. This marks a sharp reversal from May, when Cloudflare’s stock fell more than 16% after the company reported its first-quarter results, notes the industry publication Silicon Angle. At that time, strong financial results took a back seat to a weak outlook and news of a 20% workforce reduction. In addition, Cloudflare’s stock came under pressure this spring due to the “software apocalypse”—investors were selling off software developer stocks and feared that the development of artificial intelligence would undermine demand for traditional software.
However, these concerns now appear to have been put aside: investors are returning to software company stocks, as noted by Yahoo Finance. In July, the iShares Expanded Tech-Software Sector ETF (IGV), which primarily tracks the stocks of software developers, rose 4.4% and has already gained about 4% since the beginning of August.
One of the key factors behind this trend has been the steady growth of cloud technologies, the publication explains. For example, revenue from Amazon Web Services, Microsoft Azure, and Google Cloud in the second quarter of 2026 showed growth that exceeded expectations. Corporate spending on cloud technologies is seen as an indicator of demand in the software market, Yahoo Finance notes. Thus, the latest reports from Cloudflare and the big tech companies confirm that cloud providers remain the main winners in the ongoing race to build infrastructure for AI, writes Reuters.
Against this backdrop, most Wall Street analysts are optimistic about Cloudflare’s prospects: 26 of the 37 analysts covering the company’s stock recommend buying it. Eight recommend holding, and three recommend selling, according to MarketWatch. However, the average price target of $278.45 implies a 2.1% decline in the company’s share price relative to its most recent closing price.
This article was AI-translated and verified by a human editor
