Cloudflare (NET, Financial) jumps after a “strong” Q1 beat and upbeat outlook sending shares up more than 7.5% early trading.
Cloudflare reported first-quarter revenue of $479 million, surpassing its guidance by $10 million and outperforming Street expectations by 300 basis points, driven by large deals in its SASE and Workers product lines, BofA's Madeline Brooks wrote.
The analysts maintained their Buy rating with a $160 price target, highlighting that go-to-market investments rose to 38% of revenues in Q1 (from 36% in Q4 2024) to capitalize on momentum, even as operating margin dipped slightly to 11%.
Jefferies kept a Hold rating but trimmed its price target to $150 from $170, noting a 2.3% beat to guidance's midpoint—the firm's largest in five quarters—while pointing to prudent revenue guidance amid an unchanged macro backdrop.
Its team led by Brent Thill emphasized that a $130 million five-year deal underlines Cloudflare's strategic importance in AI-enabled security, though they called the operating-margin result “mildly disappointing” relative to the revenue surprise.
Morgan Stanley's Keith Weiss reiterated an Overweight rating and raised his target to $150 from $144 after Cloudflare signed both a nine-figure transaction and a seven-year agreement, calling the platform a “Best Athlete” ready to outpace peers under uncertainty.
The convergence of strong GTM leadership and landmark contracts, Weiss argued, validates the company's innovation roadmap and positions it to capitalize on surging demand for secure, AI-powered network services.
Why It Matters: Cloudflare's ability to beat consensus and secure multiyear deals suggests its model is resonating with enterprises—potentially driving further reacceleration and outperformance.
Investors will look for Q2 guidance and margin targets when Cloudflare reports again in late July.
