Piper Sandler upgraded Cloudflare (NET) to Overweight from Neutral on Wednesday, sending the stock up roughly 5% during afternoon trading.
The firm set a price target of $222, implying around 24% upside from the current level of $178.65.
The upgrade follows a rough stretch for the stock. NET had dropped 15.4% over the prior week, which Piper Sandler called a buying opportunity.
Despite that recent dip, the stock is still up 64% over the past year.
The core of the upgrade is Cloudflare’s positioning across what Piper Sandler calls multiple growth vectors — delivery, application security, networking-as-a-service, SASE, infrastructure, and AI-as-a-service.
The firm has long considered Cloudflare one of its favourite long-term stories. It says the infrastructure landscape is shifting in ways that play directly to Cloudflare’s strengths.
Piper Sandler flagged early Q1 2026 indicators as solid, pointing to accelerating website growth, rising market share, and strong demand across security and networking products.
The firm expects Cloudflare to reiterate its 2026 guidance when it next reports.
A big part of the bull case is Cloudflare’s growing role in AI infrastructure. Edge computing — which puts AI processing closer to end users — is becoming a larger slice of the market, and Cloudflare is well placed to capture it.
The company has direct partnerships with OpenAI and Anthropic, which analysts say positions it well as AI workloads grow across caching, security, and application delivery.
Piper Sandler described the company’s model as a “true platform strategy,” with strong large language model relationships expected to drive compounding growth.
Revenue growth came in at 30% most recently, alongside a 75% gross profit margin — numbers that support the longer-term thesis.
The firm projects revenue of approximately $2.79 billion in 2026, climbing to $3.6B in 2027, with earnings per share rising steadily across both years.
Cloudflare has been active on the product front. The company recently launched Cloudflare Mesh, a private networking tool designed to connect AI agents and infrastructure without exposing internal systems to the public internet.
It also expanded its Agent Cloud platform to help developers build and deploy AI agents at scale, and introduced Dynamic Workers, an isolate-based runtime for rapid AI-generated code execution.
A partnership with Wiz, part of Google Cloud, was announced to strengthen security for AI applications, giving security teams better tools to protect AI-powered workloads.
TD Cowen separately maintained its Buy rating on NET with a $265 price target, estimating 30% year-over-year revenue growth for Q1 2026.
Piper Sandler did note that the valuation remains high relative to peers, and that sustaining growth in the high-20s for multiple years is a requirement, not just an aspiration.
RPO growth and coverage ratios are what give the firm confidence that Cloudflare can meet that bar.
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