Cloudflare NET is seeing stronger demand for its Secure Access Service Edge (SASE) and Zero Trust offerings as companies look to adopt artificial intelligence (AI) more securely. Management said the key reason big companies are approaching Cloudflare is that they know they need AI but want to deploy it securely. This is creating new opportunities for the company’s SASE and Zero Trust platforms, particularly as enterprises need to secure AI agents in addition to human users, which could help the company expand market share, win larger enterprise deals and compete with established players like Palo Alto Networks PANW and Zscaler ZS in the SASE and Zero Trust markets.
Cloudflare believes its developer-focused approach gives it an advantage in this market, as the companies will have more AI agents working across their organizations and will need a security model designed for these agents. 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. Here, the agency canceled its existing request for proposal and is now reevaluating the project with an agents-first approach. Management said that its developer-focused approach has helped its SASE and Zero Trust platforms gain significant share over the past six months.
Customer wins in the second quarter of 2026 also show demand for Cloudflare’s security platform. A Fortune 100 technology company signed a $5.2 million, three-year contract for Cloudflare’s full SASE portfolio. The customer is replacing legacy VPNs and virtual desktops and moving its global workforce to a single Zero Trust platform. Cloudflare beat two first-generation Zero Trust vendors in the deal because of its network performance and unified management, with the customer expecting to operate the services with roughly one-third the staff.
The broader shift toward AI could therefore support Cloudflare’s SASE and Zero Trust growth. The company is also seeing enterprises replace fragmented security tools with its unified platform. Sustaining its recent market-share gains will depend on how well Cloudflare can convert growing AI security needs into larger and longer-term enterprise contracts. The Zacks Consensus Estimate for Cloudflare’s 2026 and 2027 revenues indicates year-over-year growth of 31.1% and 28.2%, respectively.
Cloudflare Faces Tough Competition
Palo Alto Networks’ wide range of innovative products, strong customer base and growing opportunities in areas like Zero Trust and SASE continue to support its long-term growth potential. In the third quarter of fiscal 2026, SASE was Palo Alto Networks’ fastest-growing segment, with SASE Annual recurring revenues (ARR) increasing 40% year over year. PANW's SASE business is benefiting from strong customer demand for cloud-delivered networking and security solutions as enterprises continue to support hybrid work environments and secure access to cloud applications.
Zscaler is seeing strong adoption of its Zero Trust Everywhere strategy, which is helping the company expand beyond its traditional user security offerings. The strategy combines security for users, cloud workloads and branch locations on a single platform. The company ended the third quarter of fiscal 2026 with more than 700 Zero Trust Everywhere enterprises, up from more than 550 in the previous quarter. As more customers adopt multiple products across the platform, Zero Trust Everywhere could help Zscaler increase customer spending, win larger deals and support long-term growth.
NET’s Price Performance, Valuation & Estimates
Shares of Cloudflare have jumped 55.7% in the year-to-date period against the Zacks Internet – Software industry’s decline of 1.8%.
NET YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, NET trades at a forward price-to-sales ratio of 32.57, significantly higher than the industry’s average of 4.09. The Zacks Value Score of F also 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 $1.21 per share, revised downward by a penny over the past 30 days, indicating a 30.11% 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).
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