Down 39% From Its Recent Highs, Is This Artificial Intelligence (AI) Stock Finally a Buy?

Core Viewpoint - Cloudflare's stock has experienced significant volatility, dropping 39% after a strong start in 2025, despite solid fourth-quarter results and growth prospects driven by AI offerings [1][2][5]. Financial Performance - Cloudflare reported $1.67 billion in revenue for 2024, marking a 29$222 billion by 2027 [6]. - The company's remaining performance obligations (RPO) increased by 36% year-over-year in Q4 2024, indicating a strong pipeline of future revenue [7][8]. Valuation Metrics - Cloudflare's stock is currently trading at 22 times sales and 131 times forward earnings, which are higher than its ratios at the end of 2024, suggesting that the stock has become more expensive [4][5]. Market Opportunities - The company is capitalizing on the growing demand for cloud-based AI infrastructure, offering access to Nvidia's GPUs for training large language models without the need for significant hardware investment [9][10]. - Cloudflare's recent launch of the Cloudflare for AI platform aims to secure AI applications, tapping into a rapidly growing market for AI trust, risk, and security management, which could exceed $16 billion in annual revenue over the next decade [11][12]. Future Growth Potential - Analysts forecast a pickup in Cloudflare's earnings growth in 2026 and 2027, driven by the favorable growth drivers discussed [12][13].