Can AI Security Demand Boost Cloudflare's Zero Trust & SASE Growth?
Cloudflare NET is seeing growing interest in its Zero Trust and SASE products as enterprises look to secure the increasing use of artificial intelligence (AI) agents. During the second-quarter 2026earnings call management said the biggest reason large companies are reaching out is that they know they need to adopt AI but want to do so securely. As businesses deploy more AI agents, they will need security controls that can protect these agents, along with their human users. This is creating a new opportunity for Cloudflare’s security business.
Cloudflare believes its approach to securing AI agents can help its Zero Trust and SASE platforms gain market share. The company said many traditional Zero Trust vendors continue to focus mainly on human users, while Cloudflare is building its security model around the growing number of AI agents that enterprises will use. In one example, a large U.K. government agency was evaluating a first-generation Zero Trust provider but reconsidered the project after discussing its plans for AI agents with Cloudflare. The agency canceled its existing request for proposal and is now reevaluating the project with an agents-first approach.
The shift toward AI agents could also strengthen demand for Cloudflare’s broader security platform. Management said the company’s SASE and Zero Trust platforms have gained share significantly over the past six months, helped by its developer platform and its focus on AI. Cloudflare’s developer platform gives it a direct connection to companies building and deploying AI agents, creating opportunities for the company to bring security services into these workloads as they scale.
The opportunity comes as AI-driven traffic is expanding rapidly across Cloudflare’s network. More than 50% of the traffic on the network was nonhuman in the second quarter, while more than 80% of major AI companies are already Cloudflare customers. As enterprises deploy more AI agents, the need to secure their identities, access and activity could increase demand for Zero Trust and SASE solutions.
Cloudflare Faces Tough Competition
Zscaler ZS and Palo Alto Networks PANW are also seeing higher demand for solutions that help enterprises secure AI applications, models and autonomous agents.
Zscaler is expanding its platform to secure AI agents and enterprise AI use. Its Zero Trust Exchange for agents and Endpoint AI Security are designed to enforce AI policies and protect agent activity. The company also plans to launch Agentic SecOps, which uses AI agents to detect, investigate and respond to threats at machine speed. Zscaler ended fiscal 2026 with 950-plus Zero Trust Everywhere customers compared with more than 350 at the end of fiscal 2025.
Palo Alto Networks is taking a similar approach with Prisma AIRS, which is focused on securing AI applications and agents. Prisma AIRS crossed $100 million in ARR within four quarters of general availability and had more than 800 customers by the end of fiscal 2026. Further, agentic traffic on PANW’s SASE platform increased ninefold over the past nine months, while SASE bookings grew 40% in fiscal 2026.
NET’s Price Performance, Valuation & Estimates
Shares of Cloudflare have jumped 77% in the year-to-date period compared with the Zacks Internet – Software industry’s return of 9.2%.
NET YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, NET trades at a forward price-to-sales ratio of 35.43, significantly higher than the industry’s average of 4.44. The Zacks Value Score of F suggests that NET stock is overvalued.
NET Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for NET’s 2026 earnings is pegged at $1.26 per share, unchanged over the past 30 days, indicating a 35.5% increase from the previous year.
Image Source: Zacks Investment Research
Cloudflare currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
