Is NET a good stock to buy? We came across a bullish thesis on Cloudflare, Inc. on Compounding Your Wealth’s Substack by Sergey. In this article, we will summarize the bulls’ thesis on NET. Cloudflare, Inc.’s share was trading at $204.81 as of April 20th. NET’s forward P/E was 172.41 according to Yahoo Finance.
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Cloudflare, Inc. operates as a cloud services provider that delivers a range of services to businesses worldwide. NET delivered a strong fourth-quarter 2025 performance, reporting revenue of $614.5 million, up 34% year over year and beating estimates by 4.3%, marking the third consecutive quarter of accelerating growth. Net new ARR surged 76% to $210 million, while paying customers increased nearly 40% to 332,466, including 269 customers spending over $1 million annually, up 55% year over year.
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Full-year 2026 guidance calls for $2.785–$2.795 billion in revenue, reflecting 28–29% growth, underpinned by sustained enterprise expansion, AI-driven traffic, and developer platform adoption. Free cash flow margin improved to 16.2%, highlighting strong operational efficiency, though gross margin declined to 74.9% due to higher costs from AI workload execution and traffic mix shifts. Operating margin remained stable at 14.6%, with network CapEx at 13% of revenue, below hyperscaler levels.
Cloudflare’s AI infrastructure initiatives, particularly Workers AI, are accelerating adoption among large AI customers, with multi-million-dollar annual contracts signed, while weekly AI agent traffic more than doubled in January. The company continues to monetize executed workloads rather than infrastructure, achieving up to 10x efficiency per GPU versus hyperscalers. Its Zero Trust and Cloudflare One offerings gained enterprise traction, especially from AI-driven security needs, contributing to a rising proportion of revenue from large accounts. Globally, APAC grew 50% year over year, with EMEA and the U.S. each expanding 31%.
Strategic initiatives such as Act 4, AI Crawl Control, and partnerships with Shopify, Visa, and Mastercard position Cloudflare as a neutral intermediary in the agentic internet, enabling long-term monetization opportunities.
Risks include margin pressure from AI workloads, usage-based revenue variability, and competitive intensity in SASE and AI infrastructure markets. With a record pipeline, strong cash generation, and expanding enterprise presence, Cloudflare is well-positioned to capture value from both AI adoption and broader digital infrastructure growth, offering compelling upside potential for investors.
