Key Takeaways:
- Scotiabank upgraded Cloudflare to Sector Outperform from Sector Perform.
- Price target raised to $300 from $225, implying about 20% upside.
- Analyst cites AI-driven Workers platform as underappreciated growth driver.
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Cloudflare upgraded to Outperform at Scotiabank, PT raised to $300
Scotiabank upgraded Cloudflare Inc. to Sector Outperform from Sector Perform, raising its price target to $300 from $225.
"We feel convinced that the time is now to own NET," Patrick Colville, analyst at Scotiabank, said.
The new target implies about 20% upside from the stock's prior close. Shares rose 9% on the upgrade day. Colville cited three pillars for the call: Cloudflare's Workers platform becoming the default infrastructure for AI-generated "vibe coded" applications, traffic trends inflecting upward due to agentic AI demand, and the company winning top AI-native customers.
The upgrade positions Cloudflare as a multi-sector AI infrastructure play beyond its roots in content delivery and cybersecurity. The company posted Q1 revenue of nearly $640 million, up 34% year over year, and recently launched a Monetization Gateway that lets website owners charge AI agents for content access.
Colville noted that traffic trends, which typically precede revenue by about three quarters, are accelerating and could enable Cloudflare to beat Wall Street estimates by roughly five percentage points during the second half of 2026.
The analyst highlighted Cloudflare's success in attracting leading AI-native customers as validation of its technology architecture. He described this customer acquisition trajectory as providing a long runway for expansion.
Cloudflare's July 1 launch of the Monetization Gateway, which evolved its earlier Pay Per Crawl product into a broader Pay Per Use framework, reinforces the company's ability to monetize the transition from human-driven to agent-driven internet traffic. The feature uses the open x402 protocol to enable website owners to charge AI agents for content access.
The upgrade signals that institutional investors are beginning to price in Cloudflare's AI infrastructure opportunity beyond its traditional cybersecurity business. Investors will watch the company's Q2 earnings report for evidence that traffic inflection is translating into revenue acceleration.
This article is for informational purposes only and does not constitute investment advice.
[1] Scotiabank Sees a New Growth Story for Cloudflare[2] Scotiabank sees a new growth story for Cloudflare[3] NET stock alert: What to know as Cloudflare teams up with OpenAI[4] Cloudflare climbs after Scotiabank upgrades stock on AI growth prospects (NET)[5] This Analyst Just Upgraded Cloudflare (NET) Stock. Here's Why.