Scotiabank has upgraded Cloudflare (NET) from Sector Perform to Sector Outperform, increasing its price target from $225 to $300. This announcement resulted in the stock gapping up on Tuesday morning, opening at $259.17 after a previous close of $247.55, reflecting a rise of approximately 4.7%.

Analyst Patrick Colville indicated that recent trends in AI traffic, along with the growing adoption of Cloudflare Workers and notable enterprise wins, were pivotal in prompting this upgrade. Colville's thorough analysis, which spanned over four weeks, underscored four major points:

  • Cloudflare Workers is establishing itself as the default infrastructure for AI-driven applications.
  • There is a noticeable shift in traffic patterns which typically precede revenue spikes by three quarters.
  • Cloudflare is successfully attracting high-end, AI-native customers, affirming its architectural strength.
  • Concerns regarding enterprise agreements have diminished, thanks to insights gained from discussions with CIOs and CISOs regarding Cloudflare’s SASE and edge compute offerings.

Market Reaction and Analyst Expectations

Following Scotiabank's upgrade, NET stock traded at $256.82 during morning hours on a volume nearing 426,000 shares. Despite the optimistic outlook from Scotiabank, not all analysts share the same enthusiasm. Weiss Ratings has assigned a Sell rating for NET, while Cantor Fitzgerald and Susquehanna have opted for Neutral ratings, setting their price targets at $230 and $200 respectively. In contrast, Piper Sandler maintains an Overweight rating, while Zacks upgraded its rating from Strong Sell to Hold.

Overall, a total of 22 analysts rate the stock as a Buy, while six have Hold ratings and three are categorized as Sell. The average price target across these analysts is $244.23, considerably lower than Scotiabank's newly established target.

Investor Insights

In its recent earnings report released on May 7, 2026, Cloudflare showed an EPS of $0.25, outpacing the consensus by $0.02. Revenue reached $639.75 million, exceeding the $620.83 million estimate with an impressive 33.5% year-over-year growth. On the insider front, Co-founder Michelle Zatlyn sold 25,641 shares for approximately $5.6 million on June 18, while CFO Thomas Seifert offloaded 10,000 shares for around $2.3 million on June 17.

Looking Ahead

Investors should monitor upcoming earnings reports and any shifts in institutional ownership, as the trend among major funds may impact stock performance. Observations of AI progress and Cloudflare's penetration in high-value markets will also be crucial for future assessments.

This material is for informational purposes only and is not financial advice.