Cloudflare, Inc. (NYSE:NET) shares fell sharply Friday as investors reacted to valuation concerns despite another quarterly earnings beat.

The pullback came even as analysts highlighted the company's long-term artificial intelligence and network infrastructure growth opportunities.

Earnings Snapshot

The firm reported first-quarter revenue of $639.76 million, beating estimates of $621.87 million, while adjusted EPS of 25 cents topped estimates of 23 cents.

Despite the quarterly beat, the stock traded lower Friday as investors weighed valuation concerns and broader market sentiment.

Analyst’s Take

Goldman Sachs analyst Gabriela Borges reiterated a Buy rating on Cloudfare, raising the price forecast from $250 to $266.

Borges said Cloudflare's business model benefits from consistent growth across products at varying maturity stages.

Cloudflare could accelerate growth this year through improving product-market fit across multiple business segments. Borges noted one catalyst includes rising agentic traffic demand supporting the company's content delivery network business.

Another catalyst involves customers shifting away from higher-vulnerability hardware firewall systems. Borges also highlighted artificial intelligence inference demand as another potential long-term growth driver for Cloudflare.

The analyst said emerging AI-native businesses have yet to scale meaningfully across the broader technology industry.

However, Borges added those businesses could eventually scale operations using Cloudflare's network infrastructure and software platform.

The analyst expects Cloudflare's growth durability to continue for several years with limited artificial intelligence disruption risks.

Borges attributed that resilience to the company's network architecture and software-related competitive advantages.

The analyst's benchmarking work suggested Cloudflare exited 2025 below median gross profit per employee among software peers.

Borges added a 20% workforce reduction could place Cloudflare above peer benchmarks on operational efficiency metrics.

NET Price Action: Cloudflare shares were down 22.40% at $199.26 at the time of publication on Friday, according to Benzinga Pro data.

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