This Artificial Intelligence (AI) Stock Just Grew Revenue 34% and Landed Its Biggest Contract Ever. Is It a Buy for 2026?

Cloudflare (NET 23.53%) is one of the world’s top providers of content delivery network (CDN) services. It’s also one of the top providers of technologies that prevent distributed denial of service (DDoS) attacks.

Between these key content offerings and other crucial web services infrastructure that helps keep the digital world online and growing, Cloudflare is one of the world’s most important providers of tools and systems that support worldwide internet communications. The company may not yet be a household name for many investors, but it plays a vital role in the global internet service infrastructure.

Image source: Getty Images.

With rising demand connected to artificial intelligence (AI) technologies and strong sales momentum spurred by the continued scaling of web communications, Cloudflare has been posting impressive growth. Here’s why this tech leader should be on your radar if you’re a growth-focused investor.

Cloudflare’s business has been on a roll

Cloudflare grew revenue 34% year over year to hit $614.5 million in last year’s fourth quarter, with growth powered in part by the launching and scaling of AI agents. Crucially, Cloudflare’s average annual contract value (ACV) increased nearly 50% on an annual basis to reach $42.5 million – and the software specialist closed out its largest one-year deal in company history.

Cloudflare is winning bigger contracts among larger customers and selling additional services to small and midrange clients as they scale their operations. Growth of ACV has accelerated, and the company closed out last year with its fastest growth rate in the category since 2021.

In conjunction with strong sales growth and signs that contract value is rising at an encouraging clip, Cloudflare has also continued to post double-digit earnings growth. The company reported non-GAAP (adjusted) net income of $89.6 million in the fourth quarter – good for a 15% net income margin.

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NYSE: NET

Cloudflare

Today’s Change

(-23.53%) $-60.42

Current Price

$196.37

Key Data Points

Market Cap

$69B

Day’s Range

$192.31 - $218.99

52wk Range

$136.32 - $260.00

Volume

1.1M

Avg Vol

4.8M

Gross Margin

73.30%

Is Cloudflare poised to be a long-term winner?

Cloudflare has continued to post stellar gross margins and impressive adjusted net income margins, and the company’s strong rate of sales growth continues to paint a promising picture for earnings expansion. On the other hand, there’s a lot of strong growth for the business already priced into the stock.

As of this writing, Cloudflare is trading at approximately 184 times this year’s expected adjusted earnings and 26 times expected sales. If the company’s forecast about rising service opportunities connected to the rise of agentic AI proves to be correct, then the business could be poised to continue enjoying accelerating sales growth. On the other hand, investors have recently been taking a cautious approach to some software stocks in response to concerns that new AI offerings could have disruptive impacts.

While many software stocks have seen big valuation pullbacks connected to the threats of disruption from new AI technologies, the chances of Cloudflare’s CDN, DDoS protections, and other core services being upended by artificial intelligence appears to be low. Cloudflare’s growth-dependent valuation means that the stock may not be a great fit for more risk-averse investors. Conversely, the stock looks like a worthwhile holding for growth-oriented investors with a long time horizon.

The long-term growth outlook for Cloudflare remains very promising. The company effectively has monopolies on key elements of internet communications software infrastructure, and it seems likely to hold on to leadership in these key categories for the foreseeable future. Additionally, the company’s core offerings seem to be at little risk of being disrupted by artificial intelligence and could actually benefit hugely from the rise of agentic AI.

What’s next for Cloudflare?

For this year, Cloudflare is guiding for sales to come in between $2.785 billion and $2.795 billion – good for growth of roughly 29% at the midpoint of the range. Adjusted earnings per share for the year are expected to be between $1.11 and $1.12 – up from $0.93 per share last year.

Cloudflare is posting promising margins, and its business continues to look highly scalable. With agentic AI potentially creating a powerful long-term demand catalyst, the business could be poised for very strong sales growth over the next decade. Some strong growth is already priced into the company’s valuation, but the tech specialist’s forefront position in web infrastructure suggests that it can continue to serve up wins for long-term investors.