Cloudflare (NET) AI Stock Analysis

• Market Cap: $33.50B
• Dividend Yield: N/A
• Average Volume (3M): 4.13M
• Price to Earnings (P/E): ―
• Beta (1Y): 2.14
• Revenue Growth: 28.76%
• EPS Growth: 58.13%
• Country: US
• Employees: 4,263
• Sector: Technology
• Sector Strength: 40
• Industry: Software - Infrastructure
• EPS (TTM): -0.23
• Shares Outstanding: 308,320,920
• 10 Day Avg. Volume: 4,049,312
• 30 Day Avg. Volume: 4,130,095
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 22.02
• Price to Cash Flow (P/CF): 72.20
• P/FCF Ratio: 192.40
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $154.00
• Price Target Upside: 56.57% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 28

Cloudflare's strong revenue and cash flow growth are overshadowed by persistent profitability challenges and balance sheet concerns. While technical indicators show bearish trends, positive earnings call sentiment and strategic corporate events provide some optimism. The overall score reflects the need for improved financial stability and profitability to enhance stock performance.

Positive Factors

AI-as-a-Service Leadership

Cloudflare is expected to become the leader in AI-as-a-Service (AIaaS), which is anticipated to be the preferred AI consumption method for enterprises.

Developer Platform Growth

Cloudflare's Act 3 solutions, featuring its Workers developer platform, saw significant momentum with an impressive increase in developer adoption.

Security Enhancements

Cloudflare is gaining momentum in network security, particularly SASE, which should accelerate as firewall refresh cycles near and enterprises look to modernize with software-based security solutions.

Negative Factors

Macroeconomic Volatility

Confidence in 2H upside is a concern due to volatile broader macroeconomic signals and SMB confidence, with valuation still screening expensive.

Revenue Target Delay

The company's goal to reach $5B in ARR has been pushed out by one year to 2028, indicating a delay in achieving this target.

Valuation Concerns

Near-term stock momentum is likely curbed due to the premium valuation embedding some of the enthusiasm.

Cloudflare Business Overview & Revenue Model

Company Description

Cloudflare, Inc. (NET) is a leading American web infrastructure and website security company that provides content delivery network (CDN) services, internet security, and distributed domain name server services. Cloudflare's platform aims to improve the performance and security of its clients' websites, applications, and APIs by protecting them from cyber threats, enhancing load times, and ensuring reliable web experiences. The company operates globally, serving millions of websites and providing a diverse range of products for developers, businesses, and enterprises.

How the Company Makes Money

Cloudflare makes money primarily through a subscription-based revenue model, offering a variety of tiered service plans. These plans range from free basic services to premium packages for enterprise clients, which include advanced security features, enhanced performance optimizations, and dedicated support. Revenue is generated through recurring fees charged for these service subscriptions. Additionally, Cloudflare monetizes by providing pay-as-you-go services for specific features and usage-based billing for certain products, such as its serverless computing platform, Workers. Partnerships with major technology companies and integrations with platforms like Amazon Web Services, Microsoft Azure, and Google Cloud also help Cloudflare expand its reach and customer base, contributing to its overall earnings.

Cloudflare Financial Statement Overview

Summary

Cloudflare shows strong revenue and cash flow growth, with revenue increasing by 28.8% and a robust cash-generating capability. However, persistent net losses and a concerning balance sheet with negative total assets and equity pose risks.

Income Statement

Cloudflare has demonstrated solid revenue growth with a revenue increase from $1.30 billion in 2023 to $1.67 billion in 2024, representing a 28.8% growth rate. The gross profit margin remains strong at 77.3% in 2024. However, the company continues to report net losses, with a net profit margin of -4.7% in 2024, indicating ongoing profitability challenges.

Balance Sheet

The company's balance sheet reveals a negative equity, with total assets at -$256.2 million and stockholders' equity at $19.8 million in 2024, indicating a potentially concerning financial position. The debt-to-equity ratio is unfavorable due to the negative equity, suggesting high leverage. Despite a significant cash position, the negative total assets require attention.

Cash Flow

Operating cash flow improved significantly to $380.4 million in 2024, and free cash flow also increased to $195.4 million, reflecting robust cash-generating capabilities. The free cash flow growth rate is substantial at 63.5% year-over-year, indicating strong cash flow management despite net losses.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
1.67B	1.30B	975.24M	656.43M	431.06M
	Gross Profit
1.29B	989.74M	742.63M	509.29M	330.00M
	EBIT
-154.76M	-185.49M	-201.20M	-127.68M	-106.77M
	EBITDA
62.05M	-36.17M	-92.13M	-127.68M	-50.62M
	Net Income Common Stockholders
-78.80M	-183.95M	-193.38M	-260.31M	-119.37M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.86B	1.67B	1.65B	1.82B	1.03B
	Total Assets
3.30B	2.76B	2.59B	2.37B	1.38B
	Total Debt
1.46B	1.44B	1.58B	1.29B	428.30M
	Net Debt
1.32B	1.35B	1.37B	979.43M	319.41M
	Total Liabilities
2.25B	2.00B	1.96B	1.56B	563.71M
	Stockholders Equity
19.80M	763.05M	623.96M	815.80M	816.94M
Cash Flow		Free Cash Flow
195.39M	119.46M	-39.77M	-43.09M	-92.09M
	Operating Cash Flow
380.43M	254.41M	123.59M	64.65M	-17.13M
	Investing Cash Flow
-330.22M	-186.20M	-235.70M	-709.32M	-515.27M
	Financing Cash Flow
12.79M	-192.19M	6.35M	847.49M	504.91M

Cloudflare Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 98.36
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For NET, the sentiment is Negative. The current price of 98.36 is below the 20-day moving average (MA) of 115.60, below the 50-day MA of 134.95, and below the 200-day MA of 102.24, indicating a bearish trend. The MACD of -5.71 indicates Negative momentum. The RSI at 39.44 is Neutral, neither overbought nor oversold. The STOCH value of 25.36 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for NET.

Cloudflare Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
EBR.B	81 Outperform	$16.05B	8.74	9.37%	8.44%	-0.26%	107.20%
PANW	78 Outperform	$101.68B	86.76	23.38%	―	13.86%	-46.44%
ZS	73 Outperform	$27.03B	―	-1.21%	―	27.77%	89.39%
CRWD	73 Outperform	$79.72B	721.64	-0.69%	―	29.39%	-119.62%
AKAM	67 Neutral	$10.77B	22.58	10.66%	―	4.70%	-7.33%
Sector *	57 Neutral	$18.52B	9.81	-13.96%	2.71%	5.07%	-23.65%
NET	55 Neutral	$33.50B	―	-8.71%	―	28.76%	58.13%

Cloudflare Corporate Events

Cloudflare Announces New Board Appointments for 2025

On March 27, 2025, Cloudflare announced the resignation of Maria Eitel from its Board of Directors, effective March 27, 2025, and the appointment of three new board members: Stacey Cunningham, Karim Lakhani, and John Graham-Cumming. These appointments are expected to enhance Cloudflare’s strategic direction, with Cunningham bringing financial expertise, Lakhani offering insights into AI-driven business transformation, and Graham-Cumming providing deep technical knowledge. This change reflects Cloudflare’s commitment to driving innovation and growth as it continues to shape the future of Internet security and performance.

Cloudflare Reports Strong Revenue Growth in Q4 2024

On February 6, 2025, Cloudflare announced its financial results for the fourth quarter and fiscal year 2024, revealing significant growth in revenue and customer base. The company reported a 27% increase in fourth-quarter revenue to $459.9 million and a 29% increase in fiscal year revenue to $1,669.6 million. Despite a GAAP loss from operations, Cloudflare achieved a non-GAAP income from operations of $67.2 million in the fourth quarter. Notably, the number of customers spending over $1 million annually grew by 47%, indicating strong market traction and positioning Cloudflare for continued growth in 2025.

Cloudflare Appoints Michelle Zatlyn as Co-Chair

On February 5, 2025, Cloudflare’s Board of Directors appointed Michelle Zatlyn as Co-Chair of the Board, recognizing her significant contributions to the company’s growth. Despite this new role, Zatlyn will maintain her responsibilities as President while no longer being titled Chief Operating Officer, sharing board leadership with CEO Matthew Prince.