Cloudflare, Inc. (NET): A Bull Case Theory

We came across a bullish thesis on Cloudflare, Inc. on Compounding Your Wealth’s Substack by Sergey. In this article, we will summarize the bulls’ thesis on NET. Cloudflare, Inc.'s share was trading at $216.34 as of September 26th. NET’s  forward P/E was 185.19 according to Yahoo Finance.

Cloudflare, Inc. (NET) is a leading global cloud services provider, operating across over 335 cities in 125 countries and managing approximately 20% of global Internet traffic. Founded in 2009, the company delivers a unified platform of CDN, DDoS protection, Zero Trust security, edge computing, and developer tools, serving a rapidly growing enterprise customer base.

Cloudflare’s expansive infrastructure, economies of scale, and strong network effects create a durable moat, while high switching costs for deeply integrated enterprise clients and brand recognition reinforce customer retention. Its market opportunity spans multiple high-growth segments, including CDN, SASE, and Zero Trust, with a total addressable market projected at $231 billion by 2028.

Despite trading at a premium Forward EV/Sales of 31.1 and Forward P/E of 213.8, Cloudflare’s revenue growth remains robust, with Q2 2025 revenue up 27.8% YoY and RPO growth at 39.1%. The company added a record 15,100 customers, with enterprise expansion accelerating and revenue from $1M+ and $5M+ clients growing fastest since 2022. Key products, including Cloudflare One, Workers AI, Zero Trust, and the new Agentic Web platform, are driving adoption, while innovation in security, AI, and serverless computing underpins long-term growth. Large multi-year contracts with Fortune 100 and public-sector clients illustrate the platform’s reliability, scalability, and stickiness.

Financially, Cloudflare maintains a strong balance sheet, with cash exceeding debt and disciplined operating expense management. Dollar-Based Net Retention rebounded to 114%, net new ARR grew 48% YoY, and R&D investment remains high, fueling product expansion. While valuation multiples are elevated, strong execution, accelerating revenue, record customer additions, and continued enterprise adoption justify the premium. Cloudflare remains a market leader with multiple catalysts, positioning the company for further growth and potential upside.

Previously we covered a bullish thesis on Cloudflare, Inc. (NET) by Oliver | MMMT Wealth in April 2025, which highlighted strong network effects, 20%+ revenue growth, approaching profitability, and platform expansion across security, performance, and developer services. The stock has appreciated approximately 102% since our coverage. The thesis still stands, while Sergey shares a similar view but emphasizes record customer additions, enterprise expansion, and new products driving long-term growth.

Cloudflare, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 59 hedge fund portfolios held NET at the end of the second quarter which was 65 in the previous quarter. While we acknowledge the potential of NET as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.