Key Stats for NET Stock
- Past week performance: 7.0%
- 52-week range: $158.83 to $332.22
- Valuation model target price: $349
- Implied upside: 16.3% over 2.3 years
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A Beat, a Bond Deal, and a Government Breakthrough
Cloudflare (NET) climbed roughly 7.0% this week, and three separate storylines fed the move. The company posted a strong Q2, priced a large debt deal, and cleared a major government security hurdle. Together, they painted a picture of a business scaling faster while still investing aggressively for growth.
Q2 revenue rose 36% year over year to $696.1 million, beating estimates and marking one of Cloudflare’s strongest quarters on record. Non-GAAP EPS came in at $0.29, and the company added more than 80,000 paying customers during the period. Large customers spending over $100,000 annually grew 27%, and Cloudflare guided Q3 revenue to $736 million to $737 million.
Cloudflare also priced $2.175 billion of 0% convertible senior notes due 2031. The zero-coupon structure means the company borrows without paying cash interest during the term. The conversion price sits about sixty percent above the prior stock price at issuance. Management earmarked the proceeds for general corporate purposes and potential strategic investments. It also layered in capped calls to limit future share dilution from conversions.
Separately, Cloudflare for Government achieved FedRAMP High authorization, a certification that lets federal agencies process highly sensitive data on Cloudflare’s infrastructure. That clears the path toward Department of Defense workloads next, which could open a meaningful new revenue channel over time.
CEO Matthew Prince explained the company’s approach to growth on the second quarter earnings call. He noted that not all revenue is created equal when weighing commodity compute deals. Higher-value work receives more emphasis than lower-margin commodity compute contracts in that framework. If NET stock keeps stacking wins like this, investors may price in a bigger premium. That premium would reflect its government and AI infrastructure ambitions more fully.
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Is Cloudflare Stock Worth the Premium?
Under valuation model assumptions realized through 12/31/28, the stock is modeled using:
- Revenue Growth (CAGR): 29.7%
- Operating Margins: 14.0%
- Exit P/E Multiple: 164.8x
Based on these inputs, the model estimates a target price of $349, implying 16.3% total upside from the current share price and an annualized return of 6.6% over the next 2.3 years.
That annualized figure lands below the 9% threshold many investors use to call a stock genuinely attractive, so Cloudflare isn’t cheap by traditional measures. Its NTM P/E of roughly 203x reflects a market that’s pricing in years of sustained expansion, not just this quarter’s beat. Growth quality still looks strong, though, since paying customers surged 74% year over year and large accounts are compounding fast.
Margins remain the swing factor. Cloudflare’s LTM EBIT margin sits at negative 7.8%, so profitability improvement, not just top-line growth, will determine whether today’s price holds up. Network capital spending is expected to run 14% to 15% of revenue this year, a heavy investment load that should eventually pay off through scale.
Compared with its own history, Cloudflare trades at a steep multiple even after this week’s rally, and the valuation leaves little margin for error if growth decelerates.
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Cloudflare Versus the Field: Akamai and Zscaler
Cloudflare’s closest public comparisons sit on opposite ends of the growth spectrum. Akamai (AKAM) trades at a forward P/E near 14x, reflecting its mature, single-digit revenue growth as a legacy content delivery provider. Cloudflare’s forward two-year revenue CAGR of 30.5% dwarfs that pace, but its NTM P/E of roughly 203x is more than 14 times richer than Akamai’s multiple.
Zscaler (ZS), a closer growth peer in cybersecurity, trades at a forward P/E in the 55x to 65x range with revenue growth around 20% to 22%. Cloudflare still grows faster than Zscaler on a forward basis, yet its multiple runs even higher, so the market is effectively betting Cloudflare’s total addressable market, spanning security, developer tools, and now government cloud, is larger than either peer’s.
Cloudflare’s moat comes from its network reach and developer ecosystem. The company added nearly 2 million developers in Q2 alone, more than it added in all of 2025. That kind of platform lock-in is hard for Akamai to replicate and gives Cloudflare pricing power that pure-play security vendors like Zscaler lack.
What’s Driving NET Stock Going Forward?
The FedRAMP High authorization is the clearest near-term catalyst, since it opens the door to federal and defense workloads that carry longer contracts and higher switching costs. Management has already signaled it will pursue Department of Defense Impact Level 4 authorization next, which would expand that opportunity further.
The Workers developer platform is another driver worth watching. Prince said the platform is attracting developers building AI agents because of its fast deployment and usage-based pricing, and agentic AI tools like Monetization Gateway and cloudflare.pay could become new revenue lines as machine-to-machine commerce grows.
Convertible note proceeds give Cloudflare flexibility for acquisitions or infrastructure investment without diluting shareholders immediately, since the capped calls offset potential conversion dilution. Investors should watch how that capital gets deployed over the next few quarters.
The pace of large customer additions, 986 new accounts spending over $100,000 annually over the past 12 months, will be the clearest signal of whether Cloudflare can keep justifying its premium multiple.
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Should You Invest in Cloudflare?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
