What Happened?
Shares of cloud security and performance company Cloudflare (NYSE: NET) jumped 5% in the afternoon session after investor optimism grew ahead of its fourth-quarter 2025 earnings report, which was scheduled for release after the market close, fueled by the company's expanding role in artificial intelligence.
Analysts expected the company to report a 28.4% year-over-year increase in revenue. The positive sentiment was largely driven by enthusiasm for Cloudflare's position in the AI sector. The company's CEO, Matthew Prince, had stated that about 80% of leading AI companies already used Cloudflare's infrastructure, adding that future AI agents would have to pass through its network. This narrative was supported by reports that the company’s core products gained traction, aided by a surge in demand from AI advancements.
After the initial pop the shares cooled down to $181.59, up 3.8% from previous close.
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What Is The Market Telling Us
Cloudflare’s shares are very volatile and have had 23 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 7 days ago when the stock dropped 8.5% on the news that fears of disruption from artificial intelligence spooked investors, leading to a broad-based sell-off. The market witnessed a "basket-style reaction," a term for when investors reduce exposure to an entire segment without differentiating between individual company business models. The negative sentiment was widespread, pulling down all of the Magnificent Seven stocks and sending the S&P 500 Information Technology Sector down nearly 3%.
Cloudflare is down 7.4% since the beginning of the year, and at $181.59 per share, it is trading 28.3% 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 $1,997.
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