Cloudflare (NET) Stock Trades Down, Here Is Why

What Happened?

Shares of cloud security and performance company Cloudflare (NYSE:NET) fell 6.1% in the morning session after a broader market rotation out of the technology sector led to profit-taking following a recent rally. 

The move was part of a wider trend that saw high-growth technology stocks fall, with the Nasdaq experiencing the sharpest decline among the major indices. Multiple reports indicated that traders were locking in profits, particularly from the artificial-intelligence trade, which had previously seen a strong run-up. This market action represented a shift in investor focus, as money moved out of tech. 

Defense stocks emerged as the primary beneficiary of this capital shift, surging after President Trump proposed a massive $1.5 trillion defense budget for 2027. Major contractors rallied on the news, with Northrop Grumman jumping over 10% and Lockheed Martin gaining nearly 8%, providing a counterbalance to the tech slump that kept the S&P 500 flat. The rotation into heavy industry was further supported by a stabilization in energy markets, as crude prices rebounded.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Cloudflare? Access our full analysis report here.

What Is The Market Telling Us

Cloudflare’s shares are quite volatile and have had 19 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 17 days ago when the stock gained 2.6% on the news that investor enthusiasm for the artificial intelligence sector regained momentum, fueled by gains in industry leaders like Nvidia and Micron. This "AI-boost" acted as a primary catalyst, helping the S&P 500 approach the historic 7,000 level during the shortened holiday week. This upward trend built upon Cloudflare’s robust fundamental performance. In its most recent quarter, the company reported $562.03 million in revenue, a 30.7% year-over-year increase, with earnings per share rising to $0.27.

Cloudflare is down 3.8% since the beginning of the year, and at $188.56 per share, it is trading 25.6% 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 $2,382.

While Wall Street chases Nvidia at all-time highs, an under-the-radar semiconductor supplier is dominating a critical AI component these giants can’t build without. Click here to access our full research report.