Cloudflare, the world’s leading technology company, has shown slow growth in the recent stock market update.
Cloudflare shares fell more than 15% in premarket trading Friday after its quarterly revenue forecast disappointed investors who had bet that the stock would be a major gainer in the race to artificial intelligence adoption.
The networking and cybersecurity services provider will also lay off about 20% of its workforce due to increased use of AI tools, a move Jefferies said could hurt near-term growth.
After a 43% surge since its last quarterly results in February, analysts said expectations for the company were high, with only the forecast marking slower growth as rising AI infrastructure costs squeezed margins.
Cloudflare said it expects revenue to grow by about 30% in the second quarter, down from the 33.5% growth it reported in the first quarter. Its adjusted gross margin fell to a record low of 72.8% in the first quarter from 77.1% a year earlier.
“To protect its profitability, the company is trading depreciation for higher infrastructure costs and salaries,” said Malik Ahmed Khan, senior equity analyst at Morningstar.
Line graph showing Cloudflare stock movements
The AI-powered layoffs link Cloudflare with companies like Jack Dorsey’s Block, who have said the technology could change the way work is done by automating tasks like coding.
But experts and tech executives, including OpenAI CEO Sam Altman, warn that companies are using AI to cut jobs they would have done anyway.
Despite the stock’s decline, analysts were broadly positive on Cloudflare following the results, which included forecasting better-than-expected quarterly sales and annual revenue growth.
The company’s services have proven valuable to users of AI tools such as an autonomous agent called OpenClaw.
About four brokerages raised their price targets on Cloudflare stock, bringing the average to $243.
Cloudflare’s forward 12-month price-to-earnings ratio is 198.93, while CrowdStrike’s is 95.57 and Palo Alto’s is 50.13.
Cloudflare is a technology company that provides Internet security, website performance, and networking services. It helps websites, apps, and online services load faster and stay safe from cyber attacks.
