Scotiabank turns bullish on Cloudflare
Cloudflare Inc. (NYSE:NET) shares gained 3% on Tuesday after Scotiabank upgraded the stock to Sector Outperform from Sector Perform, citing growing confidence in the company’s long-term position within AI infrastructure.
Analyst Patrick Colville also increased his price target to $300 from $225, pointing to several catalysts that could support stronger revenue growth in the coming quarters.
AI adoption seen driving future growth
According to Scotiabank, Cloudflare’s Workers platform is emerging as the preferred infrastructure for AI-generated, or “vibe coded”, applications, including OpenAI Codex Sites and Lovable.
The broker believes this trend is not yet fully reflected in investor expectations and could become an increasingly important growth driver for the business.
“We upgrade our rating on the common shares of Cloudflare to Sector Outperform and lift our price target to $300,” Colville commented. “After spending the past 4+ weeks doing a deeper dive on Cloudflare’s opportunity, we feel convinced that the time is now to own NET as: (1) Workers is becoming the default infrastructure for vibe coded applications – including OpenAI Codex Sites and Lovable, a dynamic we think is underappreciated by investors; (2) Traffic trends, which typically precede revenue by 3 quarters are inflecting due to agentic AI and will set Cloudflare up nicely to beat and raise Street numbers by ~5pp in 2H26, (3) Cloudflare is winning the best of the best AI-native customers, which validates their architecture and provides a long runway for growth.”
Traffic trends point to revenue upside
Scotiabank noted that Cloudflare’s traffic growth, which historically leads revenue by around three quarters, is accelerating as demand for agentic AI applications increases.
The broker believes this could enable the company to outperform Wall Street forecasts by roughly five percentage points during the second half of 2026.
The report also highlighted Cloudflare’s success in attracting leading AI-native customers, viewing this as evidence of the strength of its technology platform and a positive indicator for future expansion.
Valuation remains demanding
While acknowledging that Cloudflare continues to trade at a premium valuation, Scotiabank argued that the scale of the company’s long-term AI opportunity is becoming increasingly evident, supporting a more constructive investment outlook.