Cloudflare lifts annual outlook on AI-driven demand, shares surge

Cloudflare shares jumped more than 16% in premarket trading on Friday after the cloud services company raised its full-year forecasts, betting that sustained demand tied to artificial intelligence will keep traffic flowing across its network.

The company now expects full-year revenue of $2.86 billion to $2.87 billion, up from its earlier projection of $2.805 billion to $2.813 billion. The revised outlook, released after markets closed on Thursday, exceeds the average analyst estimate of $2.81 billion, according to LSEG-compiled data.

Cloudflare also lifted its adjusted earnings per share forecast to a range of $1.25 to $1.26, compared with its prior guidance of $1.19 to $1.20.

The results follow Amazon.com's strongest cloud growth in more than four years, with the e-commerce giant noting it would not have enough capacity to meet all demand in 2026. Together, the two reports underscore that software companies remain key beneficiaries of the ongoing scramble to build AI infrastructure.

Analysts at Morgan Stanley highlighted Cloudflare's Workers developer platform as its fastest-growing segment, driven by a shift toward a usage-based model, and said they expect the company to exceed its outlook.

RBC Capital Markets analysts noted that Cloudflare has "multiple, durable avenues to AI-monetization over the long-to-medium term that warrants a premium valuation." Analysts also pointed to cybersecurity as a growing tailwind, as cutting-edge AI models reshape the cyber-risk landscape.

Cloudflare shares have gained more than 44% so far this year, compared with a near-77% rise in rival CrowdStrike and a 95% jump in Palo Alto Networks. The stock trades at over 190 times its forward price-to-earnings ratio, versus more than 145 for CrowdStrike, according to LSEG-compiled data.