To The Moon

Software stocks recovered some losses for last week on Friday (06 Feb), and we have some names coming up with their earnings this week.

$Cloudflare, Inc.(NET)$ is scheduled to report its fiscal Q4 2025 earnings on Tuesday, February 10, 2026, after the market closes. The company heads into this print with significant momentum, having reaccelerated revenue growth to 31% in Q3. However, with the stock coming off recent all-time highs and a premium valuation, the margin for error is slim.

Key Metrics to Watch

Investors will focus on whether Cloudflare can maintain its "rule of 40" performance (growth + margin) while scaling its AI and enterprise segments.

Strategic Focus Areas

• The AI Tailwinds: Management has touted that 80% of leading AI companies use Cloudflare. Look for specific revenue contributions from Workers AI and the AI Gateway.

• Zero Trust / SASE: BTIG recently upgraded the stock, citing rapid market share gains in Zero Trust. Success here is what allows Cloudflare to sign $100M+ mega-deals.

• Sales Execution: Since the departure of CJ Desai (President of Product) in late 2025, investors want to see if the "go-to-market" transformation remains on track.

Cloudflare’s (NET) Fiscal Q3 2025 earnings (reported October 30, 2024) were a standout "beat-and-raise" quarter. The report was defined by a significant reacceleration in revenue and a sharp improvement in key efficiency metrics, which helped the stock rally nearly 8% the following day.

Q3 2025 Financial Summary

Revenue: $562 million, up 31% YoY. This was the second consecutive quarter of accelerating growth (up from 28% in Q2), signaling that Cloudflare is successfully moving past the post-pandemic cloud-spend digestion.

Non-GAAP EPS: $0.27, significantly beating the $0.23 consensus estimate.

Large Customers: Reached 4,009, a 23% YoY increase. This group (customers spending >$100k) now contributes 73% of total revenue, up from 67% a year ago.

Net Retention (DBNRR): Jumped to 119%, a 500-basis-point increase sequentially. Management attributed this to better "cross-selling" of security and AI products.

Free Cash Flow: $75 million (13% margin), up from $45.3 million a year ago.

The "Lesson Learnt" from Guidance

The primary lesson from the Q3 guidance—and the subsequent market reaction—is that Cloudflare has mastered the "Conservative Setup."

The Strategy of "Prudent Acceleration"

Despite the massive reacceleration to 31% growth in Q3, management provided Q4 revenue guidance of $588.5M – $589.5M, which implies a slight deceleration back to 28% growth.

 The Lesson: Management purposefully leaves room for "upside surprise." By guiding slightly below the current trajectory, they de-risk the stock against macroeconomic volatility while giving themselves a lower hurdle to clear for the "Fiscal Year Beat."

Efficiency Over "Growth at All Costs"

The guidance for Non-GAAP Operating Margin remained disciplined. Cloudflare is signaling to the market that even as they chase massive AI opportunities, they will not sacrifice their long-term target of 75-77% gross margins.

The Lesson: High-growth software companies are no longer rewarded for revenue growth alone; the market now demands a clear path to GAAP profitability. Cloudflare’s narrowing GAAP net loss ($1.3M in Q3) suggests they are listening.

The "Pool of Funds" Impact

CEO Matthew Prince noted that earlier "Pool of Funds" (pre-paid credits) contracts had temporarily suppressed DBNRR. As those pools are now being consumed, retention is "ticking back up."

The Lesson: Investors should look past short-term dips in retention metrics if the underlying Remaining Performance Obligations (RPO)—which grew 43% YoY—remain strong. RPO is often a more accurate "truth meter" for future revenue than quarterly billing.

Summary Table: Q3 Performance vs. Guidance

Cloudflare (NET) Price Target

Based on 32 analysts from Tiger Brokers app offering 12 month price targets for Cloudflare in the last 3 months. The average price target is $229.92 with a high forecast of $300.00 and a low forecast of $117.00. The average price target represents a 32.74% change from the last price of $173.21.

Short-Term Trading Analysis

Cloudflare is a "high-beta" stock, often moving 10-15% in either direction following earnings.

The Bull Case (Long Opportunity): If Cloudflare beats revenue estimates ($595M+) and raises 2026 guidance significantly, the stock could retest its 52-week high of $260. Recent channel checks suggest strong partner momentum, which often precedes a beat.

The Bear Case (Short/Caution): The stock currently trades at a steep valuation (~18x EV/Sales). Even a "beat" can lead to a sell-off if the 2026 outlook is deemed "conservative" or if GAAP losses widen unexpectedly.

Trading Strategy: * Implied Move: Options markets are currently pricing in a move of roughly ±11%.

The "Whipsaw" Risk: Cloudflare often gaps up or down initially, then reverses mid-call as CEO Matthew Prince provides color on AI.

Peer Note: Watch $Palantir Technologies Inc.(PLTR)$ and $Datadog(DDOG)$. If they show strong enterprise AI demand earlier in the week, it often sets a positive (but high) bar for NET.

Palantir (PLTR) crushed Q4 2025 expectations with $1.41 billion in revenue (up 70% YoY) and adjusted EPS of $0.25. Growth was driven by a 137% surge in U.S. commercial revenue and massive government contracts. The company also issued a bullish 2026 revenue guide of $7.18–$7.20 billion.

So how much would Cloudflare take from this pie, might be key to Cloudflare earnings performance?

Technical Analysis - Exponential Moving Average (EMA)

We are seeing NET trying to make an upside towards its 50-day period, despite a negative RSI momentum, and we might seeing some upside movement coming from the recovery strength of the software stocks sector.

But investors might still be concerned of Cloudflare premium valuation and this could pose a challenge to its post earnings release movement. So it might a good chance to consider whether to take position at current Cloudflare stock price. But I would watch how the price action turned out for Cloudflare stock on Monday (09 Feb).

Summary

Cloudflare (NET) is set to report its fiscal Q4 2025 earnings on Tuesday, February 10, 2026, after the market closes. Following a strong Q3 reacceleration, the focus for this quarter is whether the company can sustain its "Rule of 40" performance and meet elevated expectations.

Financial Expectations

• Revenue: Analysts expect $590.2 million (up 28.3% YoY), aligning with management’s guidance range of $588.5M – $589.5M.

• Earnings (Non-GAAP EPS): Pegged at $0.27, reflecting a 42% increase from the previous year.

• Implied Move: Options markets are pricing in a volatility swing of roughly ±11% post-earnings.

Key Metrics & Sentiment

• Large Customer Growth: Investors are watching for the addition of high-value contracts (>$100k annual revenue). This segment drove 73% of revenue last quarter and is critical for maintaining growth durability.

• AI Monetization: Cloudflare has seen strengthening momentum in its Workers AI and AI Gateway services. Success here, specifically in converting AI traffic into revenue, is a primary catalyst for the stock's premium valuation.

• Market Position: BTIG recently upgraded NET to "Buy," citing rapid market share gains in Zero Trust/SASE. However, some analysts warn of valuation risks, as the stock currently trades at a high forward sales multiple (approx. 18x).

Short-Term Trading Outlook

The stock enters the print with high expectations but faces headwinds from recent insider selling and a cautious macroeconomic environment.

• Bull Scenario: A beat on the top line ($595M+) combined with strong 2026 guidance could spark a rally toward the $200+ level.

• Bear Scenario: Even a slight miss or conservative outlook for the next fiscal year may lead to a sharp correction, given the "priced for perfection" valuation.

The Lesson: Cloudflare typically guides conservatively. A "beat-and-raise" is usually necessary just to maintain its current price levels, while the real "pop" often depends on management's commentary regarding AI agent infrastructure and 2026 revenue targets.

Appreciate if you could share your thoughts in the comment section whether you think Cloudflare could provide earnings growth with significant momentum despite concerns over its premium valuation.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.