Cloudflare (NET) Jumps Big on Q2 Beat. How Our AI Score Called It Two Years Ago

By AltIndex Research · 14 min read · August 7, 4:44 am

Cloudflare beat on both lines and raised full-year guidance, sending the stock up 15% after hours. Our AI Score has rated NET a buy for most of the last two years, and our job postings data flagged the AI-first restructuring three months before the 8-K disclosed it.

Cloudflare (NET) reported second quarter revenue of $696.1 million on Thursday, up 35.9% year over year against a consensus of $664.8 million. Adjusted EPS came in at $0.29 versus $0.27 expected. Management guided Q3 revenue to $736 million to $737 million, roughly 2% above the street, and lifted the full-year outlook to $2.864 billion to $2.87 billion. The stock traded up to $330 in extended hours, a new all time high.

At AltIndex, we're not surprised by this. Cloudflare has consistently ranked among the stocks with the highest AI Scores on our platform over the past two years, supported by strong underlying alternative data. Long before this quarter’s earnings beat, the signals were already pointing in the right direction. Hiring activity remained elevated, employee and growth metrics stayed strong, and our job postings data even picked up Cloudflare’s shift toward an AI-first organization months before the restructuring was formally disclosed. While no signal can predict a single earnings report, Cloudflare is a good example of how alternative data can reveal improving business momentum well before it becomes obvious in the headline numbers.

$10,000 Two Years Ago Is $40,700 Today

In August 2024, Cloudflare traded at $80.76 and our AI Score read 62.5. Anything at 60 or above is a buy signal. Today the stock is $328.82. That is a 307% return, and it turns $10,000 into roughly $40,700.

The score did not spike and then fade. It held. Across 25 months of data, NET averaged 62.3 and spent 17 of those months in buy territory. The other eight were hold. Not once in two years did the score drop into sell range.

Context matters for what a reading in the low-to-mid 60s actually means. The score is not a percentile, and the top of the distribution is thin. Among companies above $10 billion in market cap, only nine currently score 75 or better, and the highest score in that entire group is 85. A stock that parks in the 60s for two straight years sits in the upper tier of our universe, not the middle of it.

AltIndex AI Score and Price Data

Entry timing mattered less than most investors would assume. Buying at the October 2024 reading of 67.5 returned 275%. Buying in February 2025 at 66.3 returned 111%. Even the worst possible entry, the two-year score peak of 72.9 in December 2025 at $201.24, is up 63% in eight months.

Five Straight Beats and Accelerating Revenue

The fundamental case is the least exotic part of this story and the most consistent. Cloudflare has now beaten consensus EPS five quarters in a row: $0.21 against $0.18 in June 2025, $0.27 against $0.23 in September, $0.28 against $0.27 in December, $0.25 against $0.23 in March 2026, and $0.29 against $0.27 this quarter.

Revenue over those same seven quarters ran $460 million, $479 million, $512 million, $562 million, $615 million, $640 million, $696 million. Growth did not decay across that ramp, which is the unusual part. Companies adding $230 million of quarterly revenue in two years normally see the percentage rate compress. Cloudflare's accelerated instead, driven by what management describes as record growth in total paying customers, large customers, and developers on the platform.

Quarterly Revenue and EPS vs. Consensus

The Demand Signal Nobody Was Watching

Reported revenue arrives 40 days after a quarter closes. Web traffic updates every month.

Cloudflare's webpage traffic went from 30.6 million monthly visits in August 2025 to 54.9 million in June 2026, an increase of 80%. The climb was slow for the first half of that stretch and then steepened sharply: 36.8 million in February, 44.6 million in March, 50.9 million in April, 54.9 million by June. That inflection began in the same weeks the stock bottomed near $170.

One month in that series is not a demand signal. November 2025 shows 60.4 million visits, a jump that coincides with the November outage that took large parts of the web offline and sent people to Cloudflare's status page and support docs. Strip that month out and the underlying trend is cleaner, not weaker.

Traffic to cloudflare.com is a reasonable proxy for developer adoption, and developer adoption is what converts into paying customers two and three quarters later. The 80% climb in monthly visits and the 36% climb in quarterly revenue are the same story observed at different lags.

AltIndex Web Traffic Data (monthly visits)

Hiring told the same story from the inside. LinkedIn headcount grew from 5,839 in August 2025 to 8,326 in August 2026, up 42.6%. The last leg was the steepest of the whole run, adding 843 people between the July and August readings. Companies do not add that many people in a single month unless they are staffing to capture demand they can already see.

The congressional trading data added a smaller confirmation. Representative Gilbert Cisneros bought NET on October 13, November 20, and December 16 of 2025, and again on February 16 of this year, in a price range of roughly $200 to $220. He did sell once in between, on January 13, so this is a pattern rather than a straight line, but the net direction was right by more than 50%.

The Hiring Collapse That Predicted the Restructuring

Buried in Thursday's 8-K, alongside the beat, was $150.7 million in restructuring charges and a plan to move to an AI-first operating model that includes an estimated workforce reduction.

Our job postings data saw it coming in March.

Cloudflare had about 575 roles open in early March 2026. By late May it had 96. An 83% collapse in open roles over eleven weeks is not a seasonal wobble, it is a hiring freeze. Postings have since recovered to roughly 240, well under half the March level.

The sequencing is what makes this readable rather than confusing. Job postings measure intent to hire, so they move first. Headcount measures realized hiring, so it keeps climbing while the backlog of accepted offers closes out. Postings falling in March while headcount peaked in July is precisely the pattern you get when a company decides to stop growing its cost base months before it says so publicly.

The people inside the building noticed. Our employee business outlook signal, which tracks how employees rate their own company's six-month prospects on review sites, held between 62 and 64 from December through May. The June reading came in at 52. July and August held at 51. Our alert fired on July 14 at negative 20.3% against the April high.

AltIndex Job Postings Data

An investor watching only the tape had no way to know a restructuring was coming until 4:05 p.m. on August 6. An investor watching hiring data had a strong hint by late May and confirmation from employee sentiment by mid-July.

What Could Go Wrong From Here

Valuation is the obvious problem. At $328.82 the market cap is roughly $124 billion against about $2.5 billion in trailing revenue, or 49 times sales. That is among the richest multiples in large-cap software, and the stock now trades above the $321 consensus target even after this week's raises from BofA and Oppenheimer.

Margins moved the wrong way. GAAP gross margin fell to 71.8% from 74.9% a year ago, and non-GAAP gross margin fell to 73.1% from 76.3%. Running AI inference workloads is more capital intensive than serving cached HTML, and that shows up here. The restructuring is partly an answer to that pressure, which means the AI-first pivot is a cost story as much as a growth story.

The Bottom Line

Cloudflare's quarter validated a thesis that has been visible in alternative data for two years: rising developer traffic, aggressive hiring into demand, five consecutive earnings beats, and a score that never once flashed sell. Investors who acted on that in August 2024 are up 307%.

The forward question is whether 49 times sales already prices in the AI-first pivot. Watch the job postings line. If it keeps recovering toward 400, the restructuring was a rebalancing. If it rolls over again, the cost story is bigger than management guided.

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Disclosure: This article is for informational purposes only and does not constitute investment advice. AltIndex aggregates publicly available alternative data signals. Past signal performance does not guarantee future results. Always do your own due diligence before making investment decisions.