Key Takeaways
- Jim Cramer told a Mad Money caller he likes Cloudflare more than Akamai, even though he called Cloudflare “the most expensive stock in the market.”
- Cloudflare trades at 169x forward earnings against 12x for Akamai, after growing 39% in the third quarter while Akamai grew 6%.
- Cloudflare booked its first Act 4 revenue in the third quarter, including payments for helping OpenAI crawl more efficiently, but hasn’t disclosed the amount.
On Monday’s Mad Money, Jim Cramer took a call from a viewer who’d bought Akamai Technologies (AKAM) at $103 and watched it slide to $78.
Cramer blamed the slide on a convertible bond sale (“they did this big convertible bond and everyone’s running from it”). That same day, Akamai announced $2.2 billion of convertible notes, and the stock closed at $80.29.
Then he pivoted to Akamai’s pricier rival, Cloudflare (NET), and its CEO, Matthew Prince, whom he called “the real deal.”
“I think that Cloudflare, even though it’s the most expensive stock in the market, I like more than I like Akamai,” he said.
Cramer’s Right About Cloudflare’s Price
Cloudflare trades at 169x its expected earnings over the next 12 months. Akamai trades at 12x, even after landing an $11.6 billion compute deal with Anthropic in September.
Most of that gap is growth. Cloudflare’s third-quarter revenue rose 39% to $782.5 million, its fastest growth in nearly four years, while Akamai’s rose 6% to $1.12 billion. And Cloudflare has been priced like this for years: 169x is close to its 173x average at quarter-ends since mid-2023.
Analysts Already Expect a Lot
Analysts expect Cloudflare’s revenue to rise from $2.17 billion in 2025 to $5.09 billion in 2028, about 31% a year in both 2027 and 2028.
That’s full-year revenue, while management’s goal is $5 billion in annualized revenue by the fourth quarter of 2028. A full year at $5.09 billion implies a fourth-quarter pace above that goal, so to justify 169x, Cloudflare has to beat estimates that already run ahead of its own target.
AI agents are the reason it might. Cloudflare said on its second-quarter call that non-human traffic passed human traffic on its network in May, and that if trends hold it could reach 1,000 times human traffic within five years.
Traffic only helps if someone pays for it. Cloudflare calls its effort to develop new internet business models Act 4, and Prince said the company recorded its first Act 4 revenue in the third quarter, including a service that helps OpenAI crawl more efficiently. It hasn’t disclosed the amount. Carrying more traffic also costs money: GAAP gross margin fell to 71.2% in the third quarter from 74.0% a year earlier.
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
A 169x Stock Has Further to Fall
Cloudflare got a taste of that risk on Nov. 5, when it fell 8% ahead of its report as the Democratic sweep hit AI stocks. It rebounded 11% the next day on its results, but a 169x multiple has far more to give back in a selloff than a 12x one.
Akamai’s multiple is well below its own five-year average of 16x.
And Akamai isn’t standing still. Management expects 2027 revenue growth of 17% to 22% in constant currency as cloud infrastructure revenue more than doubles, and total revenue above $7 billion in 2028. If that lands, Cramer’s growth gap narrows fast.
Cloudflare’s February Report Is the Test
I can see why Cramer prefers Cloudflare. It grew 6.5 times as fast as Akamai on reported revenue last quarter, it expects its first GAAP profit in the fourth quarter, and its network sits in front of the agent traffic Prince expects to swamp the web.
At 169x, though, I’d keep a Cloudflare position small until Act 4 revenue is big enough to disclose. The fourth-quarter report, expected in February, should show whether the GAAP profit lands and bring 2027 guidance to set against the $3.90 billion analysts expect.
So What Is Cloudflare Stock Actually Worth?
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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 of the stocks mentioned. Thank you for reading, and happy investing!
