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NET anticipates revenues between $736 million and $737 million for the third quarter of 2026. The Zacks Consensus Estimate for NET’s third-quarter revenues is pegged at $733.3 million, indicating year-over-year growth of 30.5%.
For the third quarter of 2026, the company expects non-GAAP earnings of 34 cents per share. The Zacks Consensus Estimate for NET’s third-quarter earnings is pegged at 35 cents per share, suggesting growth of 28.6% from the same quarter last year. The consensus mark for earnings has remained unchanged over the past 30 days.
Image Source: Zacks Investment Research
Cloudflare’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 9.30%.
Our proven model does not conclusively predict an earnings beat for Cloudflare this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.
Factors Likely to Influence Cloudflare’s Q3 Results
Cloudflare’s third-quarter 2026 results are expected to benefit from the rapid growth of AI agents and the emergence of the agentic Internet. During the second quarter of 2026, more than 50% of the traffic flowing across Cloudflare’s network was non-human, reflecting the growing use of AI agents. Management expects this shift to create greater demand for the company’s global network, security controls and developer tools. As enterprises increasingly deploy AI agents and autonomous workflows, demand for Cloudflare’s global network, application services and security offerings is expected to have remained strong in the to-be-reported quarter
Growing adoption of Cloudflare’s Workers developer platform is expected to be another key growth driver in the third quarter of 2026. The platform is gaining traction among developers building and deploying AI agents and applications. Cloudflare added nearly two million developers in the second quarter of 2026, taking its total developer base to more than 7.4 million. Management noted that Workers has become a meaningful contributor to revenue, with customers increasingly including the platform in larger contracts and using it to support additional workloads. This momentum is likely to have supported demand for Cloudflare’s developer offerings in the to-be-reported quarter.
Cloudflare’s security and Zero Trust offerings are also expected to have supported third-quarter performance. Enterprises are increasingly looking to secure AI agents and consolidate fragmented networking and security products on unified platforms. During the second quarter, the company secured several large contracts for application services, Zero Trust and its SASE portfolio. Management also noted that demand for secure AI adoption is creating new opportunities for its SASE and Zero Trust products. Strong customer interest and continued vendor consolidation are likely to have supported growth in these offerings.
Expansion among large customers is expected to have remained an important growth driver in the third quarter of 2026. Cloudflare ended the second quarter with 4,698 customers generating more than $100,000 in annual revenues, up 27% year over year. Dollar-based net retention improved to 120%, up from 118% in the previous quarter and 114% a year ago. These metrics reflect stronger customer additions and increased spending by existing customers. NET’s unified platform approach, combined with usage-based services and global edge infrastructure, is expected to have attracted customers looking to modernize applications and AI workloads during the third quarter of 2026.
However, higher network utilization and the growing mix of developer-focused products are likely to have continued pressuring gross margins in the third quarter of 2026. Increasing infrastructure costs associated with rising AI and application traffic, along with continued investment in platform expansion, are anticipated to have weighed on profitability in the to-be-reported quarter. Additionally, persistent macroeconomic and geopolitical uncertainty is expected to have continued affecting enterprise spending decisions.
NET Price Performance & Stock Valuation
Cloudflare shares have surged 42.4% year to date (YTD), outperforming the Zacks Internet - Software industry’s decline of 3.1%. The stock also outperformed its peers, including F5 Inc. (FFIV - Free Report) , Zscaler (ZS - Free Report) and Check Point Software (CHKP - Free Report) . YTD, shares of F5 and Zscaler have returned 32.6% and 5.8%, respectively, while Check Point Software shares have plunged 18%.
YTD Price Return Performance
Image Source: Zacks Investment Research
Cloudflare is currently trading at a higher price-to-sales (P/S) multiple compared with the industry. NET’s forward 12-month P/S ratio sits at 27.88X, higher than the industry’s forward 12-month P/S ratio of 3.85X. The Zacks Value Score of F also suggests that NET stock is overvalued.
NET Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
The stock trades at a premium valuation to other industry peers, including F5, Zscaler and Check Point Software. At present, F5, Zscaler and Check Point Software have P/S multiples of 5.23X, 9.49X and 5.28X, respectively.
Investment Consideration for Cloudflare
Cloudflare is well-positioned to benefit from the rapid adoption of AI agents and the growing demand for cloud infrastructure, application services and cybersecurity solutions. Its Workers developer platform is gaining traction among developers building AI applications, while its SASE and Zero Trust offerings are benefiting from enterprises looking to secure AI workloads and consolidate vendors. Strong customer additions and higher spending by existing customers further support the company’s growth prospects.
However, rising network costs remain a concern for gross margins. The company’s second-quarter gross margin declined 320 basis points year over year to 73.1%, partly due to higher network costs as paid traffic increased relative to free traffic. As paid traffic grows relative to free traffic, a larger portion of Cloudflare’s network costs is being allocated to cost of revenue. This shows that Cloudflare is handling more traffic that requires infrastructure and network resources, which is putting pressure on the company’s gross margins. Continued growth in AI and developer workloads could require higher infrastructure spending, which could limit NET’s near-term margin expansion even as revenues continue to grow rapidly.
Conclusion: Hold Cloudflare Stock Right Now
Cloudflare’s Zero Trust and SASE businesses are benefiting from growing demand for AI security, while strong large-customer growth, higher customer spending and rising AI-related traffic support the company’s revenue outlook.
However, Cloudflare’s gross margins remain under pressure as higher paid traffic and AI workloads increase infrastructure costs. Further, the company’s premium valuation warrants a cautious approach to the stock.
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Cloudflare to Post Q3 Earnings: Buy, Sell or Hold the Stock?
Key Takeaways
Cloudflare (NET - Free Report) is scheduled to report third-quarter 2026 results on Nov. 5, 2026.
NET anticipates revenues between $736 million and $737 million for the third quarter of 2026. The Zacks Consensus Estimate for NET’s third-quarter revenues is pegged at $733.3 million, indicating year-over-year growth of 30.5%.
For the third quarter of 2026, the company expects non-GAAP earnings of 34 cents per share. The Zacks Consensus Estimate for NET’s third-quarter earnings is pegged at 35 cents per share, suggesting growth of 28.6% from the same quarter last year. The consensus mark for earnings has remained unchanged over the past 30 days.
Image Source: Zacks Investment Research
Cloudflare’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 9.30%.
Cloudflare, Inc. Price and EPS Surprise
Cloudflare, Inc. price-eps-surprise | Cloudflare, Inc. Quote
Earnings Whispers for Cloudflare
Our proven model does not conclusively predict an earnings beat for Cloudflare this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.
Cloudflare has an Earnings ESP of 0.00% and carries a Zacks Rank #3 at present. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Likely to Influence Cloudflare’s Q3 Results
Cloudflare’s third-quarter 2026 results are expected to benefit from the rapid growth of AI agents and the emergence of the agentic Internet. During the second quarter of 2026, more than 50% of the traffic flowing across Cloudflare’s network was non-human, reflecting the growing use of AI agents. Management expects this shift to create greater demand for the company’s global network, security controls and developer tools. As enterprises increasingly deploy AI agents and autonomous workflows, demand for Cloudflare’s global network, application services and security offerings is expected to have remained strong in the to-be-reported quarter
Growing adoption of Cloudflare’s Workers developer platform is expected to be another key growth driver in the third quarter of 2026. The platform is gaining traction among developers building and deploying AI agents and applications. Cloudflare added nearly two million developers in the second quarter of 2026, taking its total developer base to more than 7.4 million. Management noted that Workers has become a meaningful contributor to revenue, with customers increasingly including the platform in larger contracts and using it to support additional workloads. This momentum is likely to have supported demand for Cloudflare’s developer offerings in the to-be-reported quarter.
Cloudflare’s security and Zero Trust offerings are also expected to have supported third-quarter performance. Enterprises are increasingly looking to secure AI agents and consolidate fragmented networking and security products on unified platforms. During the second quarter, the company secured several large contracts for application services, Zero Trust and its SASE portfolio. Management also noted that demand for secure AI adoption is creating new opportunities for its SASE and Zero Trust products. Strong customer interest and continued vendor consolidation are likely to have supported growth in these offerings.
Expansion among large customers is expected to have remained an important growth driver in the third quarter of 2026. Cloudflare ended the second quarter with 4,698 customers generating more than $100,000 in annual revenues, up 27% year over year. Dollar-based net retention improved to 120%, up from 118% in the previous quarter and 114% a year ago. These metrics reflect stronger customer additions and increased spending by existing customers. NET’s unified platform approach, combined with usage-based services and global edge infrastructure, is expected to have attracted customers looking to modernize applications and AI workloads during the third quarter of 2026.
However, higher network utilization and the growing mix of developer-focused products are likely to have continued pressuring gross margins in the third quarter of 2026. Increasing infrastructure costs associated with rising AI and application traffic, along with continued investment in platform expansion, are anticipated to have weighed on profitability in the to-be-reported quarter. Additionally, persistent macroeconomic and geopolitical uncertainty is expected to have continued affecting enterprise spending decisions.
NET Price Performance & Stock Valuation
Cloudflare shares have surged 42.4% year to date (YTD), outperforming the Zacks Internet - Software industry’s decline of 3.1%. The stock also outperformed its peers, including F5 Inc. (FFIV - Free Report) , Zscaler (ZS - Free Report) and Check Point Software (CHKP - Free Report) . YTD, shares of F5 and Zscaler have returned 32.6% and 5.8%, respectively, while Check Point Software shares have plunged 18%.
YTD Price Return Performance
Image Source: Zacks Investment Research
Cloudflare is currently trading at a higher price-to-sales (P/S) multiple compared with the industry. NET’s forward 12-month P/S ratio sits at 27.88X, higher than the industry’s forward 12-month P/S ratio of 3.85X. The Zacks Value Score of F also suggests that NET stock is overvalued.
NET Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
The stock trades at a premium valuation to other industry peers, including F5, Zscaler and Check Point Software. At present, F5, Zscaler and Check Point Software have P/S multiples of 5.23X, 9.49X and 5.28X, respectively.
Investment Consideration for Cloudflare
Cloudflare is well-positioned to benefit from the rapid adoption of AI agents and the growing demand for cloud infrastructure, application services and cybersecurity solutions. Its Workers developer platform is gaining traction among developers building AI applications, while its SASE and Zero Trust offerings are benefiting from enterprises looking to secure AI workloads and consolidate vendors. Strong customer additions and higher spending by existing customers further support the company’s growth prospects.
However, rising network costs remain a concern for gross margins. The company’s second-quarter gross margin declined 320 basis points year over year to 73.1%, partly due to higher network costs as paid traffic increased relative to free traffic. As paid traffic grows relative to free traffic, a larger portion of Cloudflare’s network costs is being allocated to cost of revenue. This shows that Cloudflare is handling more traffic that requires infrastructure and network resources, which is putting pressure on the company’s gross margins. Continued growth in AI and developer workloads could require higher infrastructure spending, which could limit NET’s near-term margin expansion even as revenues continue to grow rapidly.
Conclusion: Hold Cloudflare Stock Right Now
Cloudflare’s Zero Trust and SASE businesses are benefiting from growing demand for AI security, while strong large-customer growth, higher customer spending and rising AI-related traffic support the company’s revenue outlook.
However, Cloudflare’s gross margins remain under pressure as higher paid traffic and AI workloads increase infrastructure costs. Further, the company’s premium valuation warrants a cautious approach to the stock.