Every investor has a name that lives on the watch list. For me, with food stocks, it's Cava. In tech, that name is Cloudflare (NET 1.29%). Cloudflare is not the most exciting artificial intelligence (AI) play, it is definitely not the cheapest infrastructure stock, and it just went through one of the worst weeks of its public life.
Yet, Cloudflare's underlying business keeps doing the kinds of things that matter over a five-to-10-year horizon, which is why it keeps drawing me back.
Image source: Getty Images.
It's been a brutal month for Cloudflare so far. In early May, the company announced its first large-scale layoff, cutting roughly 1,100 roles. CEO Matthew Prince attributed the decision to efficiency gains from AI, even as the company posted record revenue and beat both top- and bottom-line estimates for the first quarter. The market response was harsh — shares fell more than 20% on the news.
That kind of dislocation is uncomfortable, but it is also informative. The layoff was not driven by demand collapse. It was driven by the company believing its own AI thesis enough to act on it in its own cost structure. Whether the market eventually agrees is a separate question.
The more interesting part of the Cloudflare story is what it spent the spring shipping. Throughout Agents Week 2026, the company rolled out an extensive list of products aimed at making it the default infrastructure for AI agents, including Workers AI updates and a new inference platform that lets developers package and serve their own models.
The pitch here is straightforward: If agents are going to become a meaningful share of internet traffic, they will need a fast, distributed compute layer to run on. Cloudflare has spent more than a decade building exactly that layer for human traffic.
This is the angle that keeps the stock interesting to me beyond any quarterly print. Most security comparisons miss the point that the company is increasingly an application platform. Workers, R2 object storage, D1 database, and Workers AI now form a stack that competes more with hyperscalers than with traditional content-delivery providers.
Cloudflare has never been cheap on traditional valuation metrics, and the recent layoff debate showed how quickly sentiment can flip when growth even decelerates modestly. Stock-based compensation remains high, diluting shareholders and complicating the path to generally accepted accounting principles (GAAP) profitability. The agentic AI thesis is also unproven at scale. It is plausible, but it is not guaranteed.
There is also a competitive concern worth naming. Amazon Web Services, Microsoft Azure, and Alphabet's Google Cloud are all racing to own the agent runtime layer. Cloudflare's bet is that developers will choose a global, lightweight, edge-first platform over larger, more centralized clouds. That bet may take years to settle, though.
A useful question for any long-term holding is whether the company's product roadmap is widening or narrowing the moat. With Cloudflare, the products shipped over the last 12 months have meaningfully expanded what a developer can do on the platform without leaving it. Layer in a record-revenue quarter, a workforce restructuring that should improve operating leverage, and a credible AI-agent narrative, and the long-term shape of the business looks better than the stock chart suggests.
Stocks that look the most attractive on a chart are rarely the ones you build long-term conviction around. Cloudflare trades expensively, gets punished hard on any wobble, and keeps building out exactly the kind of platform that compounds quietly.
That being said, I don't see the stock going much lower with all they have going on. If you can handle volatility and are willing to stay patient through the ups and downs, this is a stock I'd keep on my radar whenever the market offers a cheaper entry point.
Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Cava Group, Cloudflare, and Microsoft. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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Cloudflare isn't a cheap, smooth ride, but it's quietly evolving into a full-stack artificial intelligence (AI)-era infrastructure platform that the market still hasn't properly priced in.
This Is the Tech Stock I Keep Coming Back to No Matter What the Market Does – The Motley Fool
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