Cloudflare Analyst Turns Bullish On AI Momentum, Security Market Gains

Core Viewpoint - BofA Securities analyst upgraded Cloudflare, Inc. from Underperform to Buy, raising the price forecast from $60 to$ 160, citing strong potential in AI-as-a-Service and network security [1] Group 1: AI and Security Growth - The momentum in AI and security is projected to drive a 30% compound annual growth rate over the next three years, an increase from the previous estimate of 25% [2] - Customers are forecasting an 8% increase in AI spending, reaching $100,000 per customer, which will account for 15% of total customer spending [3] Group 2: Market Position and Revenue Potential - Cloudflare's network security products are gaining significant market share, with a 33% penetration rate and over 50% of new spending expected to be directed toward security solutions [4] - The analyst is optimistic that Cloudflare will meet or exceed its full-year revenue guidance based on current momentum [4] Group 3: Competitive Advantage - Cloudflare is increasingly preferred over major hyperscalers like AWS, Oracle, and Azure due to its ease of use, scalability, and superior utilization benefits [3] Group 4: Revenue Targets and Execution Challenges - The company targets$ 5 billion in revenue for 2028, which assumes a revenue reacceleration and growth that is about 400 basis points higher than the average peer group forecast [5] - Achieving this goal will require near-perfect go-to-market execution, especially with Enterprise customers, who have historically been a weaker segment for Cloudflare [5]