Cloudflare Beats Q3 Estimates, Raises Outlook as AI Fuels 39% Revenue Surge

NET reported third-quarter revenue of $782.5 million on November 5, up 39% from a year earlier, according to MarketBeat and the company's own earnings release. EPS of $0.38 beat the $0.34 consensus, and revenue cleared the $737.2 million estimate. Coverage called it the company's fastest sales growth in nearly four years, and Bloomberg tied the raised profit outlook to AI-driven network demand.

The outlook did most of the work on the stock. Cloudflare guided fourth-quarter EPS to $0.43 on revenue of $845 million to $846 million, against consensus of $0.31 and $797.9 million, and lifted its full-year 2026 EPS outlook to $1.35, with full-year revenue of about $3.0 billion versus a $2.9 billion consensus. Shares traded up $26.82 to $271.33 during Friday's session, and reports of the day's gain ranged from about 10% to more than 14% depending on the snapshot. Guggenheim and Piper Sandler both raised their price targets after the print.

The quarter was not clean on profitability. Gross margin fell, and the GAAP operating loss widened: the company reported a GAAP loss from operations of $67.9 million against non-GAAP operating income of $137.1 million, or 18% of revenue. That gap between adjusted and GAAP profitability is the main counterweight to the growth story.

What to watch: whether growth near 39% holds into the fourth quarter as AI traffic scales, and whether gross margin stabilizes as the network absorbs that load. The rebound also came during a sharp week for AI and software names, so part of Friday's move may reflect the broader tech bounce rather than the print alone.