Cloudflare, Inc. (NET) Down 6.7% — Time to Throw in the Towel?
Key Points
Cloudflare, Inc. (NET) retreated sharply on the session, falling 6.72% to close at $179.69 from a prior close of $192.64. The one-day decline stripped $12.95 per share from the stock's value, keeping it under sustained pressure throughout the day and marking a notable wave of selling for a name already prone to wide swings over the past year. The move also pushed NET further from its recent highs, reinforcing the impression that the shares are losing ground rather than building on prior momentum.
Trading activity intensified as the stock weakened. Volume reached 4,733,442 shares, running well above the 90-day average of 3,585,162—a clear sign of heavier participation on the way down. Even after the selloff, NET remains well above its 52-week low of $89.42, though the distance from the 52-week high is still considerable: the stock now sits about $80.31 below the $260.00 peak (reached on 11/03/2025), roughly 31% off that level. Within the broader Information Technology sector, a single-session decline of this magnitude tends to stand out—the move left NET lagging even troubled names such as CrowdStrike (CRWD), Snowflake Inc (SNOW), and CoreWeave (CRWV).
Why Cloudflare, Inc. Price is Moving Lower
Cloudflare shares are under pressure even after a solid Q4 2025 earnings beat and upbeat 2026 guidance. Market attention has shifted away from the near-term upside surprise and toward lingering headwinds that have left the stock roughly 26% below its November highs. Sector-wide risk-off positioning in high-multiple software has weighed on sentiment broadly, and Cloudflare has faced additional reputational overhang from a prior service outage—a complication that tends to heighten investor sensitivity to execution risk for a company whose core promise is security and network reliability.
The fundamentals tell a story of strong top-line momentum alongside an unresolved profitability challenge. Revenue growth is running at 30.68%, and the most recent quarter posted a +9.7% sequential revenue increase—healthy figures, yet they haven't been sufficient to ease concerns about negative operating leverage and a profit margin that still sits at -5.11%. That margin profile helps explain why investors are demanding more concrete evidence that growth can translate into durable earnings power, especially with the stock already priced for continued high expansion.
Strategic headlines have been broadly constructive, though they introduce their own near-term uncertainty. The Mastercard cybersecurity partnership strengthens the enterprise narrative, while the Human Native acquisition deepens Cloudflare's push into AI-focused initiatives. That said, M&A activity and new platform bets can weigh on near-term margins and raise integration expectations. Analyst price targets have climbed into the $230–$265 range, yet the stock's pullback suggests the market is applying a steeper discount rate to future cash flows—keeping a cautious stance warranted despite the underlying growth story.
What is the Cloudflare, Inc. Rating - Should I Sell?
Weiss Ratings assigns NET a D rating, with a current recommendation of Sell. Cloudflare was upgraded on 3/4/2025, but the overall risk/reward profile still falls squarely in Sell territory. The takeaway is that recent improvements have not been sufficient to offset the persistent weaknesses that matter most to shareholders.
Bulls will point to the Good Growth Index and Cloudflare's 30.68% revenue growth as reasons for optimism. But that growth has yet to translate into durable profitability—the profit margin stands at -5.11%, and the forward P/E is a deeply negative -647.75. In plain terms, the company is still not generating the earnings base investors typically require when paying a premium for growth, which helps explain why robust top-line momentum has not been enough to protect total shareholder outcomes.
The most significant drag is business performance quality. The Very Weak Efficiency Index points to poor returns on capital and limited operating leverage—a combination that can be particularly damaging in Information Technology, where competitive pressure demands continuous spending. The Fair Total Return Index and Fair Volatility Index further suggest that price performance has been only middling once risk is taken into account, offering little cushion if sentiment deteriorates or execution falters.
Within Information Technology sector, NET sits with other cautionary names in the space, including CrowdStrike Holdings, Inc. (CRWD, D) and Snowflake Inc. (SNOW, D-), and it remains a step above CoreWeave, Inc. (CRWV, E+). NET does distinguish itself through balance-sheet strength, as reflected in the Excellent Solvency Index, but solvency alone does not resolve the core concern: growth without efficient, consistent profit generation leaves investors exposed whenever expectations reset.
About Cloudflare, Inc.
Cloudflare, Inc. (NET) is an Information Technology company in the Software and Services industry. It operates a cloud services platform that organizations rely on to secure, connect, and accelerate internet-facing applications and networks. Its flagship offering is a cloud-based security layer designed to sit in front of websites, apps, APIs, and enterprise networks spanning public cloud, private cloud, on-premises environments, SaaS applications, and IoT devices. Core security products include a web application firewall, bot management, DDoS protection, API security, SSL/TLS encryption, script management, a security center, and rate limiting—each aimed at reducing exposure to common web-based threats.
On the performance and networking side, Cloudflare provides content delivery, DNS, load balancing, smart routing, video delivery, web optimization, cache management, a waiting room service for traffic surges, and data localization capabilities. The company also markets a SASE platform that combines network services with Zero Trust capabilities delivered as network-as-a-service. Its networking product suite—including Magic WAN, Magic Transit, Magic Firewall, Network Interconnect, and Spectrum—positions Cloudflare as a single vendor for multiple edge networking functions that organizations have traditionally sourced from separate providers.
Beyond enterprise security and networking, Cloudflare offers an extensive set of developer-focused services, including Workers, Pages, R2 object storage, Workers AI, Vectorize, AI Gateway, KV, Durable Objects, D1, Hyperdrive, Stream, Images, and Calls. Consumer-facing products include 1.1.1.1 DNS, WARP, and a domain registrar. Founded in 2009 and headquartered in San Francisco, Cloudflare serves customers across technology, healthcare, financial services, retail, industrial, nonprofit, and government markets.
Investor Outlook
Cloudflare (NET) carries a Weiss Rating of D (Sell), a signal worth heeding even if near-term sentiment stabilizes. Investors should watch whether the stock can hold key technical support and reclaim prior resistance levels, while keeping a close eye on broader Information Technology risk appetite—elevated volatility tends to disproportionately pressure weaker risk/reward profiles. Any durable improvement would need to be reflected in the underlying factors driving the D grade, not merely in short-lived bursts of price momentum. Full rankings of all D-rated Information Technology stocks are available inside the Weiss Stock Screener.
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