Key Takeaways
- Cloudflare fell 8% today, ahead of its third-quarter report, as the AI selloff that followed Democrats’ sweep of Congress spread to software stocks.
- The campaign took aim at AI data centers, and Cloudflare’s business doesn’t depend much on them directly.
- Cloudflare guided for 31% revenue growth this quarter and has beaten the top of its guidance in each of the last three.
- The stock still trades at a steep multiple, so tonight’s numbers have to hold up.
Cloudflare (NET) sank 8% today, ahead of its third-quarter report, as the AI selloff that hammered chip stocks spread to software.
Democrats won control of both chambers of Congress after a campaign in which candidates from both parties took aim at AI data centers.
As Yahoo Finance’s Jared Blikre put it, “The stocks that had the best year are now the ones with the most to lose.” Cloudflare had climbed sharply in 2026, and it’s on pace for its worst day since May.
Congress is the wrong worry here
Cloudflare’s tie to AI data centers is mostly indirect. CEO Matthew Prince’s rule is to “invest behind demand,” adding servers to its network after customers show up. And its CFO said last year that no AI-native customer made up more than 2% of revenue.
Okta (OKTA), down 11% with no news of its own, shows the whole group is getting sold. It guided for 10% revenue growth this quarter, a third of Cloudflare’s pace, and fell just as hard. When it reports in a few weeks, watch whether its current remaining performance obligations grow the 11%-12% it guided for.
TIKR tracks 34 analysts on Cloudflare. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Cloudflare, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Cloudflare’s Analyst Ratings
Cloudflare needs another big beat
Cloudflare guided for third-quarter revenue of $736 million to $737 million, and it has beaten the top of its range by 3% to 5% in each of the last three quarters. Analysts expect growth near 30% a year through 2028:
Cloudflare’s non-GAAP gross margin was 73.1% in the second quarter, down from 76.3% a year earlier, as its fast-growing developer products carry lower margins. The last time the stock fell this hard, in May, it dropped about 24% after reporting a first-quarter gross margin of 72.8%.
There’s little room for a miss at this price. Cloudflare traded at 179x forward earnings at Monday’s close, above its 173x quarter-end average since mid-2023. After today’s drop, it sits near that average, which is still a lot to pay.
Analysts still see upside, with a consensus price target of $345 on Monday, about 30% above that day’s close:
The way I see it, Cloudflare is down today because it was one of this year’s AI winners. Another beat of 3% or more tonight, with gross margin near 73%, would make this drop look like an overreaction. Of course, if lawmakers squeeze AI spending broadly, Cloudflare’s AI customers could pull back too.
So what is Cloudflare stock actually worth?
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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 of the stocks mentioned. Thank you for reading, and happy investing!
