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NET Stock Rises 10% Post Q3 Results: Should You Buy, Sell or Hold?
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Key Takeaways
Cloudflare shares surged 9.9% after Q3 earnings rose 40.7% and revenues climbed 39.2% year over year.
Rising cybersecurity demand, SASE contracts and Zero Trust adoption are strengthening NET's growth outlook.
NET raised 2026 revenue guidance to $2.963-$2.964 billion and EPS guidance to $1.35.
Cloudflare, Inc. (NET - Free Report) shares have gained 9.9% after the company reported its third-quarter 2026 results on Nov. 5. The rise in share price can be attributed to better-than-expected third-quarter 2026 results.
In the third quarter of 2026, Cloudflare reported non-GAAP earnings of 38 cents per share, which surpassed the Zacks Consensus Estimate by 8.6%. The bottom line increased 40.7% on a year-over-year basis. The company’s third-quarter revenues of $782.5 million surpassed the consensus estimate by 6.6%. The top line increased 39.2% year over year.
Buoyed by better-than-expected third-quarter performance, Cloudflare raised its guidance for 2026. For 2026, revenues are anticipated between $2.963 billion and $2.964 billion, representing approximately 37% growth. This compares with the previous guidance of $2.864 billion to $2.870 billion, representing approximately 32% growth. Non-GAAP earnings guidance has increased to $1.35 per share from the earlier range of $1.25-$1.26.
Cloudflare shares have surged 36.3% year to date (YTD), outperforming the Zacks Internet - Software industry’s decline of 6.2%. The stock also outperformed its peers, including F5 Inc. (FFIV - Free Report) , Zscaler (ZS - Free Report) and Check Point Software (CHKP - Free Report) . Shares of F5 have returned 21.8%, while Check Point Software and Zscaler shares have plunged 22.3% and 12.1%, respectively.
YTD Price Return Performance
Image Source: Zacks Investment Research
Cloudflare has been riding on strong enterprise demand for artificial intelligence (AI)-native cybersecurity solutions. But with the stock outperforming the industry and peers, the question arises: Does it still have room to run, or is it time for investors to consider taking profits? Let’s find out.
Rising Cyber Threats to Boost Cloudflare's Security Growth
Cloudflare is seeing rising demand for its cybersecurity offerings as businesses face an increase in Internet vulnerabilities and evolving cyber threats. The growing use of AI is helping security researchers identify vulnerabilities faster, increasing the need for stronger protection.
During its third-quarter 2026 earnings call, management highlighted that six of the most serious Internet security vulnerabilities had been disclosed in less than 14 days. Cloudflare said it receives early disclosures of vulnerabilities from major AI labs and security companies and puts protections in place for its customers before these issues become public. This growing need for protection is encouraging more businesses to turn to Cloudflare for cybersecurity solutions.
The company is also securing larger customer contracts for its security offerings. During the third quarter, a U.S. federal department signed a five-year, $10.3 million contract for Cloudflare's Secure Access Service Edge (SASE) portfolio. The department selected Cloudflare to replace its legacy Virtual Private Network system and chose it over a first-generation Zero Trust provider. In another win, a multinational neobank signed a three-year pool-of-funds agreement with an average annual contract value of more than $3 million.
Cloudflare is also gaining ground against traditional Zero Trust providers as businesses look for security platforms that can protect both employees and AI agents. As companies prepare to deploy more AI agents, they need solutions that can manage identities and control access to enterprise systems. Cloudflare believes its integrated platform, which combines network security, application protection and Zero Trust services, gives it an advantage over vendors offering more limited solutions.
With rising cyber threats, stronger enterprise adoption and increasing demand for Zero Trust and SASE solutions, Cloudflare is well-positioned to expand its security business. Continued customer wins and greater adoption of its broader platform could support its long-term revenue growth. The Zacks Consensus Estimate for Cloudflare’s 2026 and 2027 revenues indicates year-over-year growth of 34.5% and 29.8%, respectively.
Image Source: Zacks Investment Research
Rising Adoption of Workers Platform Boosts NET’s Prospects
Cloudflare is seeing strong adoption of its Workers Developer Platform as businesses increasingly use it to build and run applications, including AI-powered workloads. The platform's growing popularity is supporting customer additions and increasing usage across Cloudflare's broader business. During the third quarter of 2026, Cloudflare crossed 10 million active developers on its Workers platform, up from 7 million in the previous quarter. The company added more than 158,000 paying customers, nearly double its previous quarterly record.
The growing adoption of Workers is also helping Cloudflare win larger customer contracts. During the third quarter, a rapidly growing AI company signed a one-year, $11 million pool-of-funds contract for the Workers Developer Platform. In another deal, a technology company signed a 39-month, $9.5 million contract covering application services and the Workers Developer Platform. These wins highlight the platform's growing role in supporting AI development and enterprise workloads.
Cloudflare is also seeing greater adoption of Workers among its existing large customers. Management noted that the platform is becoming an important part of nearly every pool-of-funds deal. As more enterprise developers use Workers, customers are consuming their committed funds faster, leading to earlier renewals and larger contracts. This is also supporting cross-selling opportunities across Cloudflare's security and application services. The company's improving customer spending trends were reflected in its dollar-based net retention rate, which increased to 122% in the third quarter from 119% a year earlier.
With developer adoption rising and more enterprises using Workers for AI and other applications, the platform could become an increasingly important contributor to Cloudflare's growth.
NET’s Valuation Reflects High Growth Expectations
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 26.58X, higher than the industry’s forward 12-month P/S ratio of 3.67X.
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 4.74X, 7.86X and 5.00X, respectively.
NET’s higher valuation reflects strong investor confidence in AI security demand, putting it above peers in terms of valuation, reflecting the high growth expectations of the company in the long term.
Conclusion: Buy Cloudflare Stock Right Now
Cloudflare’s strong third-quarter 2026 results and higher 2026 guidance reflect growing demand for its cybersecurity and developer platform offerings. Rising cyber threats are supporting demand for its SASE and Zero Trust solutions, while the Workers platform is gaining adoption among developers and large enterprise customers. The company’s strong revenue growth estimates and improving customer spending support the outlook for continued growth. Further, the stock’s valuation reflects high growth expectations, as Cloudflare remains well positioned to benefit from rising AI security demand over the long term.
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Image: Bigstock
NET Stock Rises 10% Post Q3 Results: Should You Buy, Sell or Hold?
Key Takeaways
Cloudflare, Inc. (NET - Free Report) shares have gained 9.9% after the company reported its third-quarter 2026 results on Nov. 5. The rise in share price can be attributed to better-than-expected third-quarter 2026 results.
In the third quarter of 2026, Cloudflare reported non-GAAP earnings of 38 cents per share, which surpassed the Zacks Consensus Estimate by 8.6%. The bottom line increased 40.7% on a year-over-year basis. The company’s third-quarter revenues of $782.5 million surpassed the consensus estimate by 6.6%. The top line increased 39.2% year over year.
Buoyed by better-than-expected third-quarter performance, Cloudflare raised its guidance for 2026. For 2026, revenues are anticipated between $2.963 billion and $2.964 billion, representing approximately 37% growth. This compares with the previous guidance of $2.864 billion to $2.870 billion, representing approximately 32% growth. Non-GAAP earnings guidance has increased to $1.35 per share from the earlier range of $1.25-$1.26.
Cloudflare shares have surged 36.3% year to date (YTD), outperforming the Zacks Internet - Software industry’s decline of 6.2%. The stock also outperformed its peers, including F5 Inc. (FFIV - Free Report) , Zscaler (ZS - Free Report) and Check Point Software (CHKP - Free Report) . Shares of F5 have returned 21.8%, while Check Point Software and Zscaler shares have plunged 22.3% and 12.1%, respectively.
YTD Price Return Performance
Image Source: Zacks Investment Research
Cloudflare has been riding on strong enterprise demand for artificial intelligence (AI)-native cybersecurity solutions. But with the stock outperforming the industry and peers, the question arises: Does it still have room to run, or is it time for investors to consider taking profits? Let’s find out.
Rising Cyber Threats to Boost Cloudflare's Security Growth
Cloudflare is seeing rising demand for its cybersecurity offerings as businesses face an increase in Internet vulnerabilities and evolving cyber threats. The growing use of AI is helping security researchers identify vulnerabilities faster, increasing the need for stronger protection.
During its third-quarter 2026 earnings call, management highlighted that six of the most serious Internet security vulnerabilities had been disclosed in less than 14 days. Cloudflare said it receives early disclosures of vulnerabilities from major AI labs and security companies and puts protections in place for its customers before these issues become public. This growing need for protection is encouraging more businesses to turn to Cloudflare for cybersecurity solutions.
The company is also securing larger customer contracts for its security offerings. During the third quarter, a U.S. federal department signed a five-year, $10.3 million contract for Cloudflare's Secure Access Service Edge (SASE) portfolio. The department selected Cloudflare to replace its legacy Virtual Private Network system and chose it over a first-generation Zero Trust provider. In another win, a multinational neobank signed a three-year pool-of-funds agreement with an average annual contract value of more than $3 million.
Cloudflare is also gaining ground against traditional Zero Trust providers as businesses look for security platforms that can protect both employees and AI agents. As companies prepare to deploy more AI agents, they need solutions that can manage identities and control access to enterprise systems. Cloudflare believes its integrated platform, which combines network security, application protection and Zero Trust services, gives it an advantage over vendors offering more limited solutions.
With rising cyber threats, stronger enterprise adoption and increasing demand for Zero Trust and SASE solutions, Cloudflare is well-positioned to expand its security business. Continued customer wins and greater adoption of its broader platform could support its long-term revenue growth. The Zacks Consensus Estimate for Cloudflare’s 2026 and 2027 revenues indicates year-over-year growth of 34.5% and 29.8%, respectively.
Image Source: Zacks Investment Research
Rising Adoption of Workers Platform Boosts NET’s Prospects
Cloudflare is seeing strong adoption of its Workers Developer Platform as businesses increasingly use it to build and run applications, including AI-powered workloads. The platform's growing popularity is supporting customer additions and increasing usage across Cloudflare's broader business. During the third quarter of 2026, Cloudflare crossed 10 million active developers on its Workers platform, up from 7 million in the previous quarter. The company added more than 158,000 paying customers, nearly double its previous quarterly record.
The growing adoption of Workers is also helping Cloudflare win larger customer contracts. During the third quarter, a rapidly growing AI company signed a one-year, $11 million pool-of-funds contract for the Workers Developer Platform. In another deal, a technology company signed a 39-month, $9.5 million contract covering application services and the Workers Developer Platform. These wins highlight the platform's growing role in supporting AI development and enterprise workloads.
Cloudflare is also seeing greater adoption of Workers among its existing large customers. Management noted that the platform is becoming an important part of nearly every pool-of-funds deal. As more enterprise developers use Workers, customers are consuming their committed funds faster, leading to earlier renewals and larger contracts. This is also supporting cross-selling opportunities across Cloudflare's security and application services. The company's improving customer spending trends were reflected in its dollar-based net retention rate, which increased to 122% in the third quarter from 119% a year earlier.
With developer adoption rising and more enterprises using Workers for AI and other applications, the platform could become an increasingly important contributor to Cloudflare's growth.
NET’s Valuation Reflects High Growth Expectations
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 26.58X, higher than the industry’s forward 12-month P/S ratio of 3.67X.
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 4.74X, 7.86X and 5.00X, respectively.
NET’s higher valuation reflects strong investor confidence in AI security demand, putting it above peers in terms of valuation, reflecting the high growth expectations of the company in the long term.
Conclusion: Buy Cloudflare Stock Right Now
Cloudflare’s strong third-quarter 2026 results and higher 2026 guidance reflect growing demand for its cybersecurity and developer platform offerings. Rising cyber threats are supporting demand for its SASE and Zero Trust solutions, while the Workers platform is gaining adoption among developers and large enterprise customers. The company’s strong revenue growth estimates and improving customer spending support the outlook for continued growth. Further, the stock’s valuation reflects high growth expectations, as Cloudflare remains well positioned to benefit from rising AI security demand over the long term.
Currently, Cloudflare carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.