Cloudflare Is Trading Gross Margin for Agent Traffic, and the Filed Quarter Says It Is Working

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Article published Sep 28, 2026. Prices below use latest available snapshots.

NET Price Structure

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Cloudflare, Inc. is doing well: up 45.2% since June 29 and up 18.1% since August 28, 52.4% above its 200-day average, and up 62.0% over the past year. At the 2026-09-28 settled close, NET $353.99 was +10.6% versus its 20-day average and +18.1% over 30 days. The newest verified quarter ends 2026-06-30 (filed 2026-08-06); revenue was $696.1M. Against 2025-06-30 revenue of $512.3M, that is +35.9% year over year. GAAP gross margin fell from 75.9% to 71.8% over five quarters. A $150.7M restructuring charge pushed the quarter's GAAP operating loss to $205.7M. Founders and executives sold stock all summer, and the price sits half again above its 200-day. The standing call is 🟡 Wait for a flag; do not chase. Entry $325–$340 · stop $305 · first target $400 · medium conviction.

Quick Snapshot (as of 2026-09-28)

Question Answer
The call 🟡 Wait for a flag; do not chase. Entry $325–$340 · stop $305 · first target $400 · medium conviction
What is Cloudflare? A global edge network in more than 330 cities that sits in front of millions of websites and corporate networks. It sells security, performance and a developer platform (Workers), and increasingly the controls that decide how AI crawlers and agents reach a site.
Why look now? Prior case (2026-09-25): The Q2 2026 10-Q (filed August 6) confirms $696.1M of revenue, the fastest growth of the last six quarters, and remaining performance obligations of $2.73B. Management raised full-year revenue guidance to $2.864–$2.870B.
What is the proof? Latest verified period ended 2026-06-30, filed 2026-08-06: revenue $696.1M. Prior case: Six quarters of accelerating growth, from 26.5% to 35.9%. Contracted backlog is growing faster than revenue, and call coverage puts dollar-based net retention at 120%.
What is the objection? GAAP gross margin fell from 75.9% to 71.8% over five quarters. A $150.7M restructuring charge pushed the quarter's GAAP operating loss to $205.7M. Founders and executives sold stock all summer, and the price sits half again above its 200-day.
Where it sits in the agent story Cloudflare works for the websites. It sells sites the tools to identify, block or charge bots and agents. The record holds no direct Muse–Cloudflare link: the captured tests route Muse's traffic through Fastly. Amazon's block on Muse is a demand signal for agent controls. That link is inference.
Stock setup The long trend remains intact; +10.6% versus the 20-day, +52.4% versus the 200-day, RSI 63.6.
Sources Business facts come from the SEC 10-K, the 10-Q, the May 8-K and the Q2 release. The Muse-routing and sentiment evidence comes from X posts by @citrini, @ScroogeCap and @TMTBreakout and a CEO clip shared by @KSimback. Those are attributed and not independently verified.

Action Matrix (reviewed 2026-09-28; levels are standing conditions)

Signal Condition Level Why
🟡 Wait Above the zone, RSI 62.2, 50.7% over the 200-day — Right trend, late entry
🟢 Buy A flag that pulls into the zone and holds the September 18 close ($323.60) $325–$340 The base of the September leg, with the stop close by
🟠 Target First target, then trail $400 Round planning level above the high
🔴 Out A close below the September 11 close ($306.53) $305 Loses the September higher low
🔴 Thesis breaks Q3 print (scheduled October 29): revenue growth back under 30% while GAAP gross margin keeps falling — Agent volume arriving without the growth that pays for the margin

The Story Right Now (as of 2026-09-28)

Cloudflare, Inc. is doing well: up 45.2% since June 29 and up 18.1% since August 28, 52.4% above its 200-day average, and up 62.0% over the past year.

Data as of 2026-09-28 close: NET $353.99, RSI 63.6, strong-up, +10.6% vs SMA20, +52.4% vs SMA200, 7D +0.7%, 30D +18.1%, 1Y +62.0%, -3.7% from the 52-week high.

Business and mechanism. A global edge network in more than 330 cities that sits in front of millions of websites and corporate networks. It sells security, performance and a developer platform (Workers), and increasingly the controls that decide how AI crawlers and agents reach a site.

Prior case (2026-09-25). The Q2 2026 10-Q (filed August 6) confirms $696.1M of revenue, the fastest growth of the last six quarters, and remaining performance obligations of $2.73B. Management raised full-year revenue guidance to $2.864–$2.870B.

Prior proof (2026-09-25). Six quarters of accelerating growth, from 26.5% to 35.9%. Contracted backlog is growing faster than revenue, and call coverage puts dollar-based net retention at 120%.

The countercase. GAAP gross margin fell from 75.9% to 71.8% over five quarters. A $150.7M restructuring charge pushed the quarter's GAAP operating loss to $205.7M. Founders and executives sold stock all summer, and the price sits half again above its 200-day.

Newest statement check. The newest verified quarter ends 2026-06-30 (filed 2026-08-06); revenue was $696.1M. Against 2025-06-30 revenue of $512.3M, that is +35.9% year over year.

News and attention check. The September 28 hosted pull returned five quote or old-earnings pages, not a new issuer event. The recent filed operating evidence remains the support for the thesis; the session's price cause is unassigned. No company event for NET was recorded between September 24 and 28.

The call: 🟡 Wait for a flag; do not chase. Entry $325–$340 · stop $305 · first target $400 · medium conviction.

Extended analysis