Cloudflare (NET) Stock Forecast & Price Target

Cloudflare has demonstrated robust growth in key financial metrics, with revenue increasing by 31% year-over-year to $562.0 million, surpassing management's guidance and reflecting the highest RPO year-over-year growth rate since F4Q22 at 42.6%. Additionally, the company achieved a significant increase in its paying customer base, which grew 33% year-over-year to approximately 296,000, alongside notable improvements in net dollar retention rate (NDR), which rose to 119%. The firm also showed strong performance in channel partner revenue, which grew by 69% year-over-year, indicating a successful expansion into enterprise sales and an increasing pipeline of growth opportunities, including promising prospects within the AI sector.

Cloudflare's recent financial performance reflects challenges in incremental profitability, with projections for 2026 bottom-line targets likely needing downward adjustments. The company's gross margin has declined due to an increased proportion of paid traffic, leading to higher costs of goods sold allocations tied to sales and marketing expenses. Additionally, the elevated valuations in the current market climate, particularly for high-growth companies, raise concerns about investor sentiment and potential further declines in stock performance given Cloudflare's current high valuation.