Cloudflare Soars 10% as Wall Street Bets on AI Traffic Goldmine

The 10% Jump That Wasn't About Earnings

Cloudflare's stock rocketed 10% Wednesday morning, but this wasn't your typical earnings beat story. Sure, Q4 revenue of $614.5 million (up 34% year-over-year) and 2026 guidance of $2.79-2.80 billion cleared the bar. But what really got Wall Street's attention was a single number: $42.5 million.

That's the average annual contract value of Cloudflare's record enterprise deal. Total new ACV grew nearly 50% year-over-year. Suddenly, "internet plumbing" started sounding less like a commodity and more like a toll road.

The timing tells the story. Cloudflare entered earnings as an "AI picks-and-shovels" idea. It exited as critical infrastructure for whatever the internet becomes next.

When Machines Browse the Web

Cloudflare's AI pitch is brilliantly simple: it doesn't need to win at building models. It just needs the web to change shape.

The company's betting on the "agentic internet" — a future where most web traffic isn't humans doomscrolling, but software talking to software. AI agents booking flights, bots scraping data, automated systems making purchases, machine-to-machine queries that still need routing, security, and acceleration.

Cloudflare already sits in that traffic stream. As CEO Matthew Prince put it, they're positioning as the control layer for non-human traffic at scale. If AI agents become the internet's primary users, someone still needs to direct that digital chaos.

Management tied demand directly to AI agent proliferation. More automated browsing, querying, buying, scraping. A messier, more machine-driven internet that needs a traffic cop.

The Analyst Parade Begins

Baird upgraded to Outperform, calling the quarter "the strongest confirmation yet that multiple growth vectors are now compounding simultaneously." William Blair's Jonathan Ho noted AI lets traffic pull from "a much larger number of sites," with Cloudflare sitting in the behavioral path.

The target price parade was swift and synchronized:

• Barclays: $250 (Overweight)
• RBC Capital: $240 (Outperform)
• TD Cowen: $265 (Buy)
• KeyBanc: $300 (Overweight)
• UBS: $220 (Neutral)

But not everyone joined the party. Morgan Stanley trimmed to $245 despite keeping Overweight. Guggenheim held Sell at $140. That spread captures the core debate: is this the future, or is the future already priced in?

The Infrastructure Play Behind the Hype

Cloudflare's rally reflects a broader market realization: the next internet boom might not be about platforms or content, but about the pipes underneath. As AI agents proliferate, someone needs to handle the explosion in machine-generated requests.

The company's enterprise momentum suggests businesses are already preparing. Record deal sizes indicate enterprises aren't just buying security anymore — they're buying capacity for an automated future.

Yet risks remain. November's outage still haunts the reliability narrative. The company's asking investors to fund growth over profits, fine until it isn't. And that 50% ACV growth needs to sustain itself as AI hype meets operational reality.