Cloudflare Cuts 1,100 Jobs and Raises Full-Year Guidance: Here’s What the Market Got Wrong

Key Takeaways for Cloudflare Stock as of June 2026

• Analysts rate Cloudflare stock 16 Buy, 6 Outperform, 10 Hold, 1 Underperform, and 1 Sell, with a street mean target of $243, implying 8% upside from the current price of $224.
• TIKR’s mid-case model values Cloudflare at $711 by December 2030, implying 217% total return from current levels, or 29% annualized.
• Cloudflare cut more than 1,100 jobs in May 2026 to accelerate its shift to an agentic AI-first operating model, and simultaneously posted Q1 revenue of $640 million, up 34% year over year, its fastest growth rate in at least six quarters.

NET stock added one million developers in Q1 while the share price fell 24%. See what the TIKR model sees on TIKR for free →

Cloudflare Stock Plunges 24% on AI Layoffs While Revenue Hits a Six-Quarter High

Cloudflare (NET) fell 24% on May 8 after guiding Q2 revenue to $664–$665 million, a rounding error below the Street’s $665 million estimate, on a stock that had already rallied 43% since February, and the selloff had almost nothing to do with the quarter it actually reported.

Q1 2026 revenue came in at $640 million, up 34% year over year and $18 million ahead of the Street’s $622 million consensus, with adjusted EPS of $0.25 beating the $0.23 estimate and free cash flow reaching $84 million, up 59% year over year.

The simultaneous announcement of 1,100 layoffs (roughly 20% of the workforce) amplified the reaction, with analysts questioning whether a cut that size would disrupt the sales capacity Cloudflare had spent two years building, even as CEO Matthew Prince told the Q1 earnings call the company had been “careful” to protect quota-carrying headcount and was redeploying AI-driven productivity gains into front-line selling capacity rather than removing them.

Investor Day on June 9 delivered the counter-argument: CFO Thomas Seifert told investors Cloudflare had clear line of sight to a Rule of 50 for 2027, meaning combined revenue growth and operating margin above 50%, with deals over $1 million growing 73% year over year in Q1 and customers spending more than $5 million annually growing 50% year over year, a cohort Cloudflare added as many of in Q1 alone as it did in all of 2025.

Prince told the Q1 call: “In the AI space, that kind of speed is a real advantage that our hyperscaler competitors simply can’t match,” as Cloudflare’s network handled hundreds of billions of agentic requests per month, a figure he described as growing exponentially.

For full year 2026, management guided revenue of $2.81 billion, representing 30% growth at the midpoint, with operating income of $418–$421 million.

Check analyst price targets for NET stock as they update, and see whether the 16 Buy ratings are moving in the same direction on TIKR for free →

Is Cloudflare Stock Undervalued After the Layoff Drop?

Cloudflare stock’s normalized EPS trajectory makes the post-layoff selloff look like a pricing error, not a thesis break.

Quarterly normalized EPS came in at $0.25 in Q1 2026, up 61% year over year, and the consensus path from here accelerates: analysts project roughly $0.27 in Q2, $0.32 in Q3, and $0.36 in Q4, with continued expansion into 2027.

That path rests on one mechanism: operating leverage compounding faster than gross margin pressure, which is already happening at the operating line even as the gross margin absorbs the cost of rapid developer platform growth.

The core tension the Street is debating centers on the Workers platform, which carries a below-average gross margin and added one million net new developers in Q1 alone, nearly matching the 1.5 million added across all of 2025, and Seifert acknowledged at Investor Day that gross margin may continue drifting near current levels before recovering.

Cloudflare;s non-GAAP operating income grew 31% year over year to $73 million, with non-GAAP operating expenses as a share of revenue falling 3 percentage points year over year to 62%.

On the forward estimates, EBITDA margins expand from 20% in Q1 to roughly 22% in Q2 and 25% in Q3 and Q4, reflecting the operating leverage Seifert outlined at Investor Day.

The bullish read is that the developer platform, despite its gross margin drag, carries unit economics comparable to the core business once scale is applied, and 5.5 million developers on the platform by end of Q1 represents a future monetization surface the current price does not yet capture.

The bear camp, occupying the 10 Hold ratings, treats gross margin stability as the prerequisite for conviction, and they need to see that the trough is actually a trough before extending targets above the mean.

The 16 Buys and 6 Outperforms reflect analysts who see the agentic infrastructure thesis as intact despite the margin noise, while the Holds represent a concrete condition: prove the gross margin floor holds in Q2 2026 results before the target expands further.

TIKR’s $711 Target for NET Stock and the Agentic Ramp That Drives It

TIKR’s mid-case values Cloudflare at $711 by December 2030, implying 217% total return from the current price of $224, or 29% annualized over 4.5 years.

Remaining performance obligations of $2.54 billion in Q1, up 36% year over year, give the revenue ramp a foundation in contracted commitments rather than speculative wins.

Cloudflare stock trades at a premium to near-term fundamentals, but the TIKR mid-case is discounting the 2030 earnings base, not the 2026 one, where the Rule of 50 trajectory and Act IV monetization are both still ramping.

The model holds if gross margin stabilizes and the agentic traffic monetization Seifert outlined at Investor Day converts from infrastructure into revenue.

Pull the full TIKR model for NET and run your own assumptions against the $711 mid-case target on TIKR for free →

Should You Invest in Cloudflare, Inc.?

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Pull up Cloudflare, Inc. stock and you’ll see years of historical financials, what Wall Street analysts expect for revenue and earnings in the quarters ahead, how valuation multiples have moved over time, and whether price targets are trending up or down.

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