The Zhitong Finance App learned that Morgan Stanley released the Cloudflare (NET.US) third-quarter performance outlook report, maintaining the stock's “gain” rating, with a target price of 370 US dollars. The bank believes that rising consumption, accelerated developer adoption, and AI/agent workloads are providing multiple growth levers for Cloudflare, which is expected to support revenue growth in the middle of the 30% range in Q3, Q4 and 2027. Recent partner inspections show that demand in CDN/application security, Workers, SASE and the broader AI sector is steady, order pipelines are healthy, and large order activity continues.
Multiple growth levers support 35% revenue growth
According to the report, Cloudflare's underlying fundamentals are still accelerating. Recent partner inspections show strong demand in the fields of CDN/application security, Workers, SASE, and broader AI, with healthy order pipelines and ongoing large order activity. Among them, Workers is still a key strong area, with rising utilization rates and consumption, and large-scale, multi-year enterprise deployments; SASE is also participating in more zero trust and network modernization opportunities, but it is still a small growth driver compared to CDN/application security and developer services; in terms of AI, Cloudflare is increasingly participating in discussions on enterprise agent architectures, inter-agent communication, and edge reasoning. Rising consumption and accelerated developer adoption are key growth levers. The report also notes that Cloudflare's opportunity does not require large-scale capital expenditure, as it has a global network and targets lightweight, distributed workloads, which is consistent with management.
Enterprise execution and developer platform momentum are also supported. According to the report, despite the high stock price, there is a positive attitude towards Cloudflare's third quarter results: momentum continues to be strong in all aspects of the platform, the visibility of the order pipeline is healthy, and large order activity continues; in particular, in CDN/application security and workers/developer platforms, partners continue to see an increase in usage and consumption, while traffic increases.
In terms of developer platforms, Cloudflare recently had more than 10 million developers, up from more than 7.4 million in the second quarter, over 5.5 million in the first quarter, and over 4.5 million at the end of 2025, which means that more than 5.5 million new developers have been added since the beginning of the year, compared to only about 1.5 million for the whole of 2025; the developer platform ARR increased 137% year-on-year in fiscal year 2025. As inference and enterprise AI deployments advance, AI/agent workloads increase, and demand for developer service platforms, security, and CDN is expected to increase further.
In terms of valuation, Cloudflare's forward market sales ratio is about 30 times, and the average of high-growth SaaS peers is about 19 times. According to the report, Cloudflare's valuation is still high and expectations are high, but the potential to maintain 30% mid-term growth in Q3/Q4 and 2027 will help support its premium valuation.
Q3 Financial Report Focus: Consumption, AI Capital Expenses, and AI Gateway
The report lists several key highlights of Cloudflare's third-quarter earnings report:
Higher consumption provides additional leverage for growth. In addition to continued corporate sales momentum, rising consumption is seen as an important incremental driver in the third quarter. Management said in the second quarter that variable revenue was accelerating, customers were spending their “Pool of Funds” (Pool of Funds) promises faster, and some customers renewed their contracts early. The report expects this trend to continue this quarter. As the share of consumer products such as Workers increases, the continued rise in utilization is expected to provide additional upside for Q3 revenue. Healthy big order activities and improved corporate sales productivity also provide additional leverage.
Developer platform adoption accelerates at the same time as product innovation. According to the report, the number of platform developers has increased rapidly, and the developer platform ARR increased 137% year-on-year in fiscal year 2025. Developers use acceleration, continuous product innovation, and an expanding developer ecosystem to further strengthen Cloudflare's position in the developer community; in particular, as AI code generation and agent workloads grow, more applications and workloads are running on Workers and a wider range of developer platforms.
To seize AI opportunities, you don't need to invest as much capital as hyperscale manufacturers. Hyperscale vendors invest heavily in large-scale centralized GPU clusters for model training and computation-intensive inference; Cloudflare's colleague Akamai builds distributed infrastructure to directly run inference workloads in the network; Cloudflare focuses on infrastructure surrounding inference and proxy applications, including Workers for computing, AI Gateway for model routing, R2 for storage, and AI traffic security. Cloudflare can use the existing global network (over 340 POP points) to support these relatively lightweight, distributed loads and limit upfront infrastructure investments. Management expects network capital expenditure to account for 14%-15% of revenue in FY2026 and 13% of revenue in FY2025. According to the report, the greater constraint on recent AI-related growth is the time of monetization rather than capacity; many applications are still in the early stages of production and require higher consumption levels to contribute more to overall growth.
AI gateways may become an important control point in the multi-model era. As businesses increasingly use multiple models and vendors, AI Gateway sits between applications and models, providing a common layer of routing, observability, security, and cost management. Cloudflare recently released Auto Router, which can automatically evaluate requests, balance quality and cost, and allocate requests to models with sufficient capacity; internal testing shows that compared to completely relying on cutting-edge models, costs can be reduced by up to 30%. According to the report, model selection is shifting from one-time development decisions to continuous optimization, giving Cloudflare an opportunity to master more layers of routing and control and participate in growing AI traffic, no matter where the underlying inference ultimately runs.