Cloudflare (NYSE:NET) Shares Gap Down - Here's Why

Key Points

• Cloudflare shares gapped down, opening at $217.22 versus the prior close of $256.79 and trading near $201.68 on heavy volume after the quarter and company news, as management announced a restructuring that will cut about 1,100 jobs (~20% of staff).
• Q1 results beat expectations — revenue rose roughly 33.5% to $639.8M and EPS was $0.25 — and management raised FY26 EPS guidance while calling AI a major tailwind, but Q2 revenue guidance came in roughly flat to slightly below Street forecasts, raising near‑term growth concerns.
• Analyst sentiment is mixed: the consensus is a "Moderate Buy" with a $233.12 target, yet insiders have sold material stakes recently and institutional ownership is very high (~82.7%), factors investors may weigh amid the stock's volatility.

Shares of Cloudflare, Inc. (NYSE:NET - Get Free Report) gapped down prior to trading on Friday . The stock had previously closed at $256.79, but opened at $217.22. Cloudflare shares last traded at $201.6760, with a volume of 4,159,359 shares.

Key Headlines Impacting Cloudflare

Here are the key news stories impacting Cloudflare this week:

• Positive Sentiment: Q1 results beat expectations: revenue grew ~33.5% and EPS topped estimates; management highlighted large enterprise customer additions, supporting longer-term growth potential. Cloudflare Q1 Earnings Top, Revenues Soar on Large Customer Additions
• Positive Sentiment: Management raised earnings guidance (FY26 EPS 1.190–1.200, Q2 EPS ~0.27) and some analysts kept/raised price targets (Piper Sandler to $250; BTIG reaffirmed buy), indicating continued confidence in the firm’s medium-term economics despite near-term turbulence. Piper Sandler Hikes Cloudflare Price Target to $250 Despite 15% After-Hours Drop: Buy the Dip?
• Neutral Sentiment: Management called AI the company's "biggest tailwind," positioning Cloudflare to capture AI-related edge and security demand — an important strategic narrative, but execution and timing are uncertain. Cloudflare stock dives on Q1 earnings, company says AI is 'biggest tailwind' in history
• Neutral Sentiment: Insider selling disclosed (director sale ~$558k) — a data point for some investors but not a clear directional signal on fundamentals. Insider Selling: Cloudflare NYSE: NET Director Sells $558,381.60 in Stock
• Negative Sentiment: Near-term revenue outlook disappointed: Q2 revenue guidance came in roughly flat to slightly below Street expectations, feeding concerns that growth will decelerate as the company invests in AI infrastructure. Cloudflare's slowing growth disappoints investors betting on AI boost
• Negative Sentiment: Company announced an AI-driven restructuring that will cut ~1,100 jobs (~20% of staff); while framed as strategic, layoffs raise near-term execution risk and could weigh on growth expectations and investor sentiment. Cloudflare to cut 20% jobs, quarterly revenue forecast falls short
• Negative Sentiment: Market reaction: the stock sold off sharply on heavy volume after-hours and into the next session as investors punished the combination of softer near-term revenue signal and the scale/timing of restructuring. Cloudflare stock sinks 18% after earnings as company cuts 1,100 employees due to AI changes

Wall Street Analysts Forecast Growth

A number of brokerages have recently commented on NET. New Street Research set a $140.00 price target on shares of Cloudflare in a research note on Wednesday, February 11th. Royal Bank Of Canada lifted their price target on shares of Cloudflare from $230.00 to $240.00 and gave the stock an "outperform" rating in a research note on Wednesday, February 11th. Zacks Research upgraded shares of Cloudflare from a "strong sell" rating to a "hold" rating in a research note on Friday, March 13th. Scotiabank reduced their price target on shares of Cloudflare from $255.00 to $225.00 and set a "sector perform" rating for the company in a research note on Wednesday, February 11th. Finally, BTIG Research reiterated a "buy" rating and issued a $243.00 price target on shares of Cloudflare in a research note on Friday. Nineteen analysts have rated the stock with a Buy rating, seven have given a Hold rating and three have given a Sell rating to the company. Based on data from MarketBeat.com, the stock has a consensus rating of "Moderate Buy" and a consensus target price of $233.12.

Cloudflare Stock Performance

The company has a quick ratio of 1.98, a current ratio of 1.98 and a debt-to-equity ratio of 1.35. The company has a market cap of $68.86 billion, a PE ratio of -672.99 and a beta of 1.67. The business's fifty day moving average is $204.88 and its 200-day moving average is $200.83.

Cloudflare (NYSE:NET - Get Free Report) last posted its quarterly earnings data on Thursday, May 7th. The company reported $0.25 earnings per share (EPS) for the quarter, topping analysts' consensus estimates of $0.23 by $0.02. The company had revenue of $639.76 million for the quarter, compared to the consensus estimate of $620.83 million. Cloudflare had a negative net margin of 4.72% and a negative return on equity of 7.24%. The firm's revenue was up 33.5% compared to the same quarter last year. During the same quarter last year, the firm posted $0.16 earnings per share. Cloudflare has set its FY 2026 guidance at 1.190-1.200 EPS and its Q2 2026 guidance at 0.270-0.270 EPS. As a group, research analysts predict that Cloudflare, Inc. will post -0.11 EPS for the current fiscal year.

Insider Buying and Selling

In related news, insider Michelle Zatlyn sold 35,080 shares of the firm's stock in a transaction that occurred on Thursday, February 19th. The shares were sold at an average price of $187.39, for a total value of $6,573,641.20. Following the transaction, the insider owned 34,514 shares of the company's stock, valued at approximately $6,467,578.46. This trade represents a 50.41% decrease in their ownership of the stock. The transaction was disclosed in a filing with the SEC, which can be accessed through this link. Also, CFO Thomas J. Seifert sold 41,557 shares of the firm's stock in a transaction that occurred on Friday, February 20th. The stock was sold at an average price of $185.04, for a total transaction of $7,689,707.28. Following the completion of the transaction, the chief financial officer directly owned 85,452 shares in the company, valued at approximately $15,812,038.08. The trade was a 32.72% decrease in their position. The SEC filing for this sale provides additional information. Over the last quarter, insiders have sold 638,766 shares of company stock valued at $125,757,221. 10.89% of the stock is owned by insiders.

Hedge Funds Weigh In On Cloudflare

Several large investors have recently added to or reduced their stakes in NET. Norges Bank purchased a new position in Cloudflare during the fourth quarter valued at approximately $718,316,000. Jennison Associates LLC lifted its holdings in Cloudflare by 135.8% during the first quarter. Jennison Associates LLC now owns 4,394,484 shares of the company's stock valued at $906,758,000 after purchasing an additional 2,530,872 shares in the last quarter. Corient Private Wealth LLC lifted its holdings in Cloudflare by 4,042.6% during the fourth quarter. Corient Private Wealth LLC now owns 1,399,378 shares of the company's stock valued at $275,887,000 after purchasing an additional 1,365,598 shares in the last quarter. Groupama Asset Managment lifted its holdings in Cloudflare by 82.6% during the third quarter. Groupama Asset Managment now owns 2,100,000 shares of the company's stock valued at $450,639,000 after purchasing an additional 950,000 shares in the last quarter. Finally, Vanguard Group Inc. lifted its holdings in Cloudflare by 2.6% during the third quarter. Vanguard Group Inc. now owns 32,317,249 shares of the company's stock valued at $6,934,958,000 after purchasing an additional 821,684 shares in the last quarter. Hedge funds and other institutional investors own 82.68% of the company's stock.

Cloudflare Company Profile

Cloudflare, Inc is a global web infrastructure and security company that provides a suite of services designed to improve the performance, reliability and security of internet properties. Its core offerings include a content delivery network (CDN), distributed denial-of-service (DDoS) protection, managed DNS, and a web application firewall (WAF). Cloudflare also provides tools for bot management, SSL/TLS, load balancing and rate limiting to help organizations maintain uptime and protect web applications from attack.

In addition to traditional edge and security services, Cloudflare has expanded into edge computing and developer platforms.

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