Cloudflare poised for second quarter revenue acceleration, says Jefferies

Cloudflare Inc. (NYSE: NET) is expected to accelerate second-quarter revenue growth and raise its full-year outlook, according to Jefferies. Investors are seeking evidence of a mid-30% growth exit rate by the end of 2026. The Q2 revenue guide of $664.5 million at the midpoint implies approximately 30% year-over-year growth, a four-percentage-point sequential deceleration despite a one-percentage-point tougher comparison. Jefferies considers the target achievable but expects at least 34% growth and guidance supporting a mid-30% exit rate. It forecasts a Q2 beat that would lift growth to about 33.6% year over year, followed by a full-year revenue-guidance increase exceeding the beat. Jefferies’ proprietary survey was mixed: performance to plan declined to 0.6% in Q2 from 2.1% in Q1, although seasonally adjusted performance was 0.8% versus Q2 2025. The survey showed continued momentum in SASE, while 65% of respondents expected Cloudflare spending to accelerate in the second half. Investors will assess the previously announced 20% workforce reduction and the search for a chief revenue officer. Management expects limited operational disruption, particularly because quota-carrying sales representatives should be modestly affected. Jefferies nevertheless sees near-term risk to growth acceleration, alongside tougher second-half comparisons. Q2 non-GAAP operating-margin guidance is 13.6% to 13.7%, implying about 220 basis points of sequential expansion and roughly 50 basis points of year-over-year contraction. Jefferies expects upside partly from the cuts but anticipates gross-margin pressure. Full-year guidance is 14.9% to 15%, while the long-term target is above 30%, supported by AI-driven productivity gains and lower headcount. Jefferies cites AI demand and cybersecurity-vendor consolidation as catalysts, but values the stock at about 29 times estimated 2027 enterprise value to revenue. Shares traded up 7% at $303 Tuesday afternoon and were nearly 54% higher year to date.