Cloudflare Sees Agentic AI Opportunity Dwarfing Past Growth Drivers

Key Points

• Cloudflare views agentic AI as a growth opportunity larger than its previous drivers and has raised its long-term “North Star” growth target to 50% from 40%.
• Demand is emerging through the Workers platform and consumption-based revenue, with AI customers driving greater traffic and usage; Cloudflare is focusing on low-latency AI inference rather than training the largest models.
• Cloudflare is developing new monetization infrastructure for the agentic economy, including “pay per crawl,” a Monetization Gateway and digital wallets, though significant technical and pricing challenges remain.

Cloudflare NYSE: NET sees its opportunity in agentic artificial intelligence extending beyond its current growth drivers, with Chief Financial Officer Thomas Seifert saying the company’s network architecture is positioned to support low-latency, secure and distributed AI inference workloads.

Speaking at an investor event, Seifert said Cloudflare has moved from its earlier focus on improving sales execution and productivity into what he described as a broader shift driven by agentic AI. He said the company views its business in a series of “acts,” including its core network and security offerings, Workers and AI products, and a newer effort to help content creators protect and monetize their content.

“We think that that opportunity is going to dwarf what is already behind us,” Seifert said, referring to the company’s AI-related opportunities. He added that Cloudflare raised its long-term “North Star” growth target to 50% from 40% at its Investor Day and expects to exit the year with momentum toward that objective.

Developers and Consumption Revenue Signal Demand

Seifert pointed to growth in Cloudflare’s developer community and variable consumption revenue as early indicators of demand. He said the company added 2 million developers quarter over quarter and that developers are increasingly building AI applications on its Workers platform.

According to Seifert, companies including Lovable, Figma, Anthropic and OpenAI are building on Workers. He also said Cloudflare estimates that about 80% of significant AI enterprise infrastructure customers use its services.

The CFO said AI is changing software spending from seat-based subscriptions toward more variable, consumption-driven models. In Cloudflare’s recent second quarter, he said upside relative to the company’s guidance came from greater-than-expected customer consumption, including more agentic AI traffic, requests and use of products through pool-of-funds contracts.

However, that shift also makes forecasting more difficult. Seifert said Cloudflare is rethinking its forecasting processes and needs to tie more deeply into infrastructure data to identify the indicators driving consumption. He said the company may need to shift guidance midpoints to preserve ranges as consumption becomes less predictable.

Inference Focus and Capital Spending

Cloudflare does not currently view training the largest AI models as its principal market, Seifert said. Instead, it is focused on inference, including the CPU and memory-intensive work of orchestrating agentic workflows, such as determining where data comes from, what needs to be computed and which APIs need to be accessed.

Seifert said Cloudflare’s experience scheduling workloads across its network has helped it optimize AI inference. The company deploys GPU capacity across its points of presence and data centers, he said, but expects CPU and memory demand to be especially important for agentic applications.

Unlike providers that build capacity substantially ahead of anticipated demand, Cloudflare can invest in additional infrastructure in response to demand signals, according to Seifert. He said capital expenditures could rise, but that any increase would be expected to coincide with higher revenue.

He also said smaller and open AI models could create additional opportunities, including enterprise-specific use cases that may require localized or on-premise computing to limit data leakage. Cloudflare’s existing data sovereignty and privacy capabilities can help customers restrict where particular data is processed and stored, he said.

Content Monetization and Agentic Payments

Seifert described Cloudflare’s fourth “act” as an effort to build infrastructure for content monetization and transactions in an agentic AI economy. The effort began with “pay per crawl,” designed to help content creators make content scarce and negotiate payment from parties that crawl it.

He said large language models may crawl important web pages frequently because they do not know what has changed. Because more than 20% of the web is behind Cloudflare’s network, Seifert said the company can identify changes and provide that information to AI companies, potentially reducing crawling costs and bandwidth requirements.

Cloudflare has also announced a Monetization Gateway, Cloudflare Wallets and identity tools. Seifert said the company aims to support autonomous transactions involving agents, but acknowledged that significant technical work remains.

• Cloudflare is not yet capable of processing transactions at the millions-per-second scale it believes may be necessary.
• Seifert said the company is working with partners including Visa, Mastercard, American Express, PayPal and Coinbase.
• He said Cloudflare is evaluating potential pricing approaches, including transaction-based and take-rate models, with outside specialists and academics.

“The big lift, to be honest, is still in front of us,” Seifert said, emphasizing that the company is focused on building a durable model rather than rushing commercialization.

Core Products and Internal AI Adoption

Seifert said the rise of agentic AI could also benefit Cloudflare’s established content delivery, network security and SASE businesses. He cited increasing participation from media and publisher customers in the company’s network offerings and said enterprises adopting AI will need controls over data access and leakage.

While AI-related workloads may initially have lower gross margins because of computing utilization requirements, Seifert said they carry low costs to acquire and can create opportunities to attach security, sandboxing and AI Gateway products. He said Cloudflare’s strategy has long been to avoid discouraging data from moving across its network, then add value-added products around that traffic.

Internally, Seifert said Cloudflare is applying an AI-first approach to operations. He referenced the company’s employee reduction announced in the second quarter and said it has developed internal tools, including what it calls Cloudflare OS, to rethink processes. He also highlighted the company’s decision to hire 1,111 interns, saying many are working on projects intended to redesign business processes for an AI-first environment.

About Cloudflare (NYSE:NET)

Cloudflare, Inc is a technology company that provides cloud-based connectivity, security and performance services for websites, applications, networks and other internet-connected resources. Its platform is designed to help organizations deliver digital content more quickly, protect against cyber threats and manage internet traffic across a global network.

The company's offerings include content delivery and domain name system services, distributed denial-of-service protection, web application and application programming interface security, bot management, and network security tools.

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