Cloudflare (NET) stock has been in focus after the company announced a research pilot with OpenAI that uses Cloudflare’s real-time network insights to improve how AI search engines index and answer queries.

Cloudflare’s recent OpenAI pilot and AI monetization tools have coincided with strong momentum, with a 30-day share price return of 16.80% and a 90-day share price return of 65.16%. The 3-year total shareholder return of over 3x highlights how the longer term has rewarded patience.

If this AI story has your attention, it could be a good moment to widen your scope and check out 63 profitable AI stocks that aren't just burning cash

Bulls see Cloudflare’s OpenAI tie up and AI tools as proof the stock deserves a premium, while bears point to ongoing losses and a rich price tag. Which side does today’s valuation math lean toward?

Most Popular Narrative: 64.7% Overvalued

Cloudflare closed at $275.80, while the most followed narrative on the stock pegs fair value at $167.45, so the narrative sits well below where the market is currently pricing shares.

The reason I am not going higher yet is that post-quantum security may strengthen Cloudflare’s moat and customer trust, but it may not become a major standalone revenue line by itself. Cloudflare has said these upgrades are meant to be available by default, not treated like a separate premium add-on.

Curious how that fair value comes together when Cloudflare is still loss making? The narrative leans on faster top line expansion, fatter margins and a punchy future earnings multiple. The exact mix driving that $167.45 mark is where it gets interesting.

According to DaneDruss, the narrative rests on Cloudflare turning today’s losses into healthy profitability, with revenue growth, margin expansion and a future earnings multiple all working together to back into that fair value estimate. Result: Fair Value of $167.45 (OVERVALUED)

However, Cloudflare’s narrative could be tested if revenue growth slows from recent levels or if ongoing net losses persist longer than investors currently appear to tolerate.

Next Steps

With Cloudflare’s AI opportunity and premium valuation in focus, sentiment is clearly split. Consider reviewing the data yourself and weighing both sides using the 1 key reward and 1 important warning sign.

Looking for more Cloudflare investment ideas?

If Cloudflare has sharpened your interest, do not stop here. Broaden your watchlist with other focused ideas that could round out your next moves.

• Target dependable cash flows and pricing power by checking out companies in the 9 dividend fortresses.
• Spot potential value gaps by scanning companies highlighted in the screener containing 19 high quality undiscovered gems.
• Prioritise resilience and sleep-better-at-night holdings through the 73 resilient stocks with low risk scores.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.