Cloudflare (NET.US), a cybersecurity firm, has raised its full-year profit forecast above Wall Street expectations, signaling accelerating demand for network services driven by the rapid adoption of artificial intelligence.
The company reported second-quarter revenue of $696.1 million, a 35.9% year-over-year increase that surpassed estimates by $29.75 million. Adjusted earnings per share came in at $0.29, beating forecasts by $0.02. Cloudflare now projects full-year adjusted profit per share between $1.25 and $1.26, up from a prior range of $1.19 to $1.20. Analysts had averaged $1.20.
"We delivered an outstanding second quarter," Chief Executive Matthew Prince said in a statement. In May, Cloudflare announced it would cut one-fifth of its workforce as part of a shift toward an "AI-agent-first" operating model. The quarterly results exceeded projections, indicating that the downsizing and strategic pivot have not hampered growth.
As of Thursday's close, Cloudflare's stock has surged 44% year-to-date, outperforming the Russell 1000 Index's 12% gain. Investors have shown heightened interest in major cybersecurity companies this year, anticipating that AI will expand demand for digital defenses. As businesses adapt to the widespread deployment of AI models, data, and software, many industry leaders have outperformed the broader market. These gains also reflect security vendors embedding AI into their own products to automate threat detection and response—even as AI models identify a growing number of computer vulnerabilities that enterprises are struggling to patch.
Prince noted, "As the internet shifts toward AI answer engines and agent-driven business models, we are witnessing a fundamental restructuring of the internet for machine-to-machine traffic."
In the broader cybersecurity landscape, Fortinet raised its full-year revenue outlook, while Check Point Software Technologies maintained its forecast. TD Cowen described Check Point's performance as mixed, citing internal issues. Analyst Mandeep Singh stated that Fortinet's relatively strong showing compared to Check Point reflects momentum in its newly defined SASE (Secure Access Service Edge) and firewall businesses.
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