Key Highlights

• Cloudflare shares rose approximately 5.57 percent to $300.27, a gain of $15.84 from a prior close of $284.43.

• Second quarter revenue reached $696.1 million, up 36.6 percent year over year, with adjusted EPS of $0.29 beating estimates of $0.27.

• Large customer growth accelerated 27 percent year over year to 4,698 customers paying over $100,000 annually, with dollar-based net retention rising to 120 percent.

• Management raised full-year 2026 revenue guidance to a range of $2.864 billion to $2.870 billion, with price targets from Wells Fargo, Oppenheimer, BofA, and Stifel lifting into the $355 to $382 range.

Earnings Beat Drives the Rally

Cloudflare, Inc. (NYSE:NET) shares closed up 5.57 percent at $300.27 after the company delivered second quarter revenue of $696.1 million, up 36.6 percent year over year, alongside adjusted EPS of $0.29, which beat consensus estimates of $0.27. Non-GAAP operating income reached $96.1 million, representing a 13.8 percent margin, while free cash flow rose to $56.4 million, up 69 percent year over year.

Large customer growth accelerated to 27 percent year over year, with 4,698 customers now paying over $100,000 annually, and dollar-based net retention rose to 120 percent, up two points sequentially and six points year over year.

Margin Improvement and Network Expansion

Gross margin improved significantly for the first time in eight quarters to 77.3 percent, and management highlighted stabilizing unit economics, with network capital expenditure guided at 14 to 15 percent of full-year 2026 revenue. The company also highlighted major enterprise wins across application services, zero trust, and developer platform Workers, including multi-million-dollar contracts with a digital media company and a European telecom company, alongside AI/bot management technology now surpassing 7.4 million developers.

For guidance, Cloudflare expects third quarter 2026 revenue of $736 million to $737 million, representing 31 percent year-over-year growth, with operating income guided at $443 to $445 million. Full-year revenue guidance was raised to $2.864 billion to $2.870 billion, representing 32 percent year-over-year growth, and the company reaffirmed progress toward GAAP profitability, targeting an adjusted GAAP net loss of about $18 million excluding restructuring charges.

Sector Context and Risk Factors

The rally alongside a similar surge in Atlassian shares helped software stocks broadly recover from a recent selloff, though shares moderated somewhat by the close and into after-hours trading as some investors booked profits on the sharp pre-market spike.

A single day's move of this magnitude, following a period of AI-monetization uncertainty across the sector, may not by itself indicate a sustained trend. Broader software-sector sentiment and execution against the raised guidance remain factors to monitor.

Conclusion

In summary, Cloudflare (NYSE:NET) shares rose approximately 5.57 percent to $300.27 at last closing, driven by a blowout second quarter report featuring 36.6 percent revenue growth, accelerating large-customer additions, and raised full-year guidance. These are the verified facts from the earnings release and market data. Whether the advance holds may depend on continued execution against the third quarter and full-year targets management has laid out.