Cloudflare shares jump as AI demand lifts annual outlook

Cloudflare shares jumped 16% before the bell Friday after the cloud services and cybersecurity company lifted its annual revenue outlook, a sign that AI spending is spilling into the networking and security layer that sits behind the biggest names in chips and software. The company said it now expects 2026 revenue of $2.864 billion to $2.870 billion, above Wall Street expectations, and traders quickly seized on the stronger forecast.

The latest quarter gave investors the numbers they wanted. Cloudflare reported revenue of $696.1 million, up 36% from a year earlier and well ahead of the $666 million estimate in the market. Adjusted earnings came in at $0.29 a share, topping the $0.27 forecast. Cloudflare said the period set records for growth in paying customers, large customers and developers on its platform.

That performance matters because Cloudflare is not a chipmaker or a model builder. It helps route web traffic, block attacks and improve performance at the edge of the network, which puts it in the path of AI tools that generate more traffic, need lower latency and demand tighter security. Cloudflare said the rapid rise of AI agents would keep pushing more traffic across its network, a bet that appears to be showing up in customer demand faster than many investors expected.

Cloudflare’s investor materials say more than 45% of the Fortune 500 are paying customers, a scale that helps explain why the company is increasingly tied to enterprise spending on cloud infrastructure. The quarter also included a $150.7 million restructuring charge tied to its shift toward an agentic AI-first operating model, after the company said in May that it would cut about 20% of its workforce as it restructured around rapid AI adoption.

The market reaction reflected a broader shift in how investors are reading the AI boom. After months of debate over whether the gains would stay concentrated among chipmakers and a handful of mega-cap software names, Cloudflare’s outlook suggested that cloud networking, cybersecurity and edge services are also gaining from the buildout. For a company whose business depends on the plumbing of the internet, the raised forecast was a straightforward message: AI demand is not just arriving, it is expanding the revenue base.