What Happened?

Shares of cloud security and performance company Cloudflare (NYSE: NET) jumped 5.1% in the afternoon session after the company reported better-than-expected fourth-quarter results and issued an upbeat revenue forecast for the upcoming quarter. 

The company posted revenue of $614.5 million, a 33.6% increase from the prior year, surpassing analyst expectations. Adjusted earnings per share of $0.28 was in line with estimates. Billings, a measure of future revenue, were also strong at $693.3 million. Looking ahead, Cloudflare projected first-quarter revenue that was above Wall Street's forecast. However, the outlook was not entirely positive, as the company's full-year adjusted earnings per share guidance missed consensus estimates. Despite the mixed forecast, the strong revenue and billings performance, coupled with the company's key role in the expanding artificial intelligence (AI) space, fueled investor optimism.

After the initial pop the shares cooled down to $187.67, up 3.1% from previous close.

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What Is The Market Telling Us

Cloudflare’s shares are very volatile and have had 23 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was about 22 hours ago when the stock gained 5% on the news that investor optimism grew ahead of its fourth-quarter 2025 earnings report, which was scheduled for release after the market close, fueled by the company's expanding role in artificial intelligence. Analysts expected the company to report a 28.4% year-over-year increase in revenue. The positive sentiment was largely driven by enthusiasm for Cloudflare's position in the AI sector. The company's CEO, Matthew Prince, had stated that about 80% of leading AI companies already used Cloudflare's infrastructure, adding that future AI agents would have to pass through its network. This narrative was supported by reports that the company’s core products gained traction, aided by a surge in demand from AI advancements.

Cloudflare is down 4.3% since the beginning of the year, and at $187.67 per share, it is trading 25.9% below its 52-week high of $253.30 from October 2025. Investors who bought $1,000 worth of Cloudflare’s shares 5 years ago would now be looking at an investment worth $2,056.

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