Cloudflare, Inc.

(New York Stock Exchange)
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Bullish +60

Cloudflare to Post Q3 Earnings: Buy, Sell or Hold the Stock?

AI agents Customer growth Earnings report AI-generated analysis

πŸ“… Cloudflare is set to report Q3 2026 earnings on Nov. 5, 2026, with revenue guidance of $736M-$737M.

πŸš€ Revenue is expected to grow 30.5% year-over-year, driven by the surge in AI agent traffic which now accounts for over 50% of network flow.

πŸ’» The Workers developer platform gained nearly two million developers in Q2, becoming a meaningful contributor to revenue.

πŸ›‘οΈ Security and Zero Trust offerings are benefiting from enterprise demand to secure AI agents and consolidate fragmented networking products.

πŸ“ˆ Large customer expansion remains strong, with customers generating over $100k in annual revenues up 27% year-over-year.

πŸ’° Dollar-based net retention improved to 120%, reflecting stronger customer additions and increased spending by existing clients.

⚠️ Gross margins face pressure from rising infrastructure costs linked to higher network utilization and AI workload growth.

πŸ“‰ The stock trades at a premium forward P/S multiple of 27.88X, significantly higher than the industry average of 3.85X.

πŸ† Cloudflare shares have surged 42.4% year-to-date, outperforming peers F5 (FFIV) and Zscaler (ZS).

πŸ“Š The company has beaten earnings estimates in each of the trailing four quarters with an average surprise of 9.30%.

πŸ” Management notes that demand for secure AI adoption is creating new opportunities for SASE and Zero Trust products.

🌐 Cloudflare's unified platform approach is attracting customers looking to modernize applications and AI workloads.

Bullish Signals
  • Revenue is expected to grow 30.5% year-over-year, driven by the rapid adoption of AI agents and non-human traffic.
  • The Workers developer platform added nearly two million developers in Q2, becoming a meaningful contributor to revenue.
  • Large customer expansion remains robust with customers generating over $100k in annual revenues up 27% year-over-year.
  • Dollar-based net retention improved to 120%, indicating stronger customer additions and increased spending by existing clients.
  • Security and Zero Trust offerings are benefiting from growing enterprise demand to secure AI agents and consolidate networking products.
  • Cloudflare shares have surged 42.4% year-to-date, significantly outperforming industry peers like F5 and Zscaler.
  • The company has beaten earnings estimates in each of the trailing four quarters with an average surprise of 9.30%.
Risk Factors
  • Gross margins face pressure from rising infrastructure costs associated with higher network utilization and AI workload growth.
  • The stock trades at a premium forward price-to-sales multiple of 27.88X, significantly higher than the industry average of 3.85X.
Full Analysis
Cloudflare (NET) is scheduled to report its third-quarter 2026 earnings on November 5, 2026. The company anticipates revenues between $736 million and $737 million, representing a year-over-year growth of approximately 30.5% against the Zacks Consensus Estimate of $733.3 million. For non-GAAP earnings per share, Cloudflare expects 34 cents, slightly below the consensus estimate of 35 cents, though this still reflects significant growth of 28.6% from the prior year. The company's performance is driven by the rapid adoption of AI agents and the 'agentic Internet,' with over 50% of network traffic in Q2 2026 being non-human. This shift is fueling demand for Cloudflare's global network, security controls, and developer tools, particularly its Workers platform which added nearly two million developers in Q2. Additionally, strong expansion among large customers, with annual revenue per customer up 27% year-over-year, and improved dollar-based net retention to 120%, supports continued growth. Despite positive revenue trends, Cloudflare faces headwinds regarding gross margins due to rising infrastructure costs associated with increased AI traffic and network utilization. The company's stock has surged 42.4% year-to-date, significantly outperforming peers like F5 and Zscaler, but trades at a premium forward price-to-sales multiple of 27.88X compared to the industry average of 3.85X. Analysts note that while revenue growth is robust, margin pressure from higher paid traffic and AI workloads warrants a cautious approach given the high valuation.