Mizuho upgrades Cloudflare on AI traction, improving deal pipeline

Investing.com -- Mizuho upgraded Cloudflare Inc (NYSE:NET) to “Outperform,” citing strengthening sales pipelines, rising adoption of its Workers AI product, and a favorable setup for growth reacceleration in the second half of 2025.

“Our recent checks on NET were more favorable than we expected,” the analysts wrote, highlighting large-deal activity and growing momentum for AI inferencing as key positives.

Mizuho said partners are forecasting an acceleration in Cloudflare-related business, supporting management’s prior guidance.

While macroeconomic uncertainty remains, the brokerage noted that Cloudflare’s scalable architecture and focus on innovation position it well in the growing AI landscape.

Cloudflare continues to drive generally good adoption for its platform going forward, and is also a beneficiary of Generative AI.

Adoption of Workers AI is expanding across cybersecurity and other AI operations, with benefits such as “lower costs, lower latency, and better protection.”

“With expectations somewhat lofty for NET, we believe the co. could struggle to consistently drive enough top-line upside to satisfy investors going forward,” analysts at Mizuho added.

Despite the upgrade, Mizuho lowered its price target to $135 from $140, citing broader sector multiple compression.

While it will take some time for Workers AI to meaningfully impact the model, adoption is expanding across a variety of use cases such as cybersecurity and streamlining for AI operations, and the benefits for customers include lower costs, lower latency, and better protection, analyst at Mizuho said.

Shares have fallen 38% since mid-February, underperforming the Nasdaq and IGV indexes, making risk/reward more attractive, the note said.

Mizuho also pointed to improving fundamentals, noting the fading impact of “pool of funds” contracts and ramping sales capacity as further drivers for growth later this year.