Cloudflare to Post Q2 Earnings: What's in Store for the Stock?

Cloudflare’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 11.62%.

Factors Likely to Influence Cloudflare’s Q2 Results

Cloudflare’s second-quarter results are likely to benefit from the rapid adoption of artificial intelligence and the emergence of the agentic Internet. As enterprises increasingly deploy AI agents and autonomous workflows, demand for Cloudflare’s global network, application services and security offerings is expected to have remained strong in the to-be-reported quarter. Management continues to view AI-driven traffic as a structural growth opportunity for its platform.

Growing adoption of Cloudflare’s Workers developer platform is expected to have been another key growth driver in the to-be-reported quarter. Enterprises are increasingly building and deploying AI-native applications closer to end users, while developers continue to embrace AI-assisted coding and inference workloads. Rising demand for AI Gateway, Agent Cloud, AI Crawl Control and related offerings is likely to have supported Cloudflare’s top-line performance in the second quarter.

The ongoing shift toward Zero Trust cybersecurity architectures is also expected to have benefited Cloudflare’s second-quarter performance. Enterprises continue to consolidate networking and security vendors in favor of unified platforms that simplify operations while enhancing security. Strong adoption of Cloudflare One, SASE, Browser Isolation, Gateway and Access solutions is likely to have remained a tailwind in the to-be-reported quarter.

Cloudflare is also benefiting from enterprises moving away from traditional hyperscaler-centric architectures toward more flexible, developer-friendly and cost-efficient networking platforms. Its unified platform approach, combined with usage-based services and global edge infrastructure, is expected to have attracted customers looking to modernize applications and AI workloads during the second quarter.

However, higher network utilization and the growing mix of developer-focused products are likely to have continued pressuring gross margins in the second quarter. Increasing infrastructure costs associated with rising AI and application traffic, along with continued investment in platform expansion, are anticipated to have weighed on profitability in the to-be-reported quarter. Additionally, persistent macroeconomic and geopolitical uncertainty is expected to have continued affecting enterprise spending decisions.

Earnings Whispers for Cloudflare

Our proven model does not conclusively predict an earnings beat for Cloudflare this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.

Though Cloudflare carries a Zacks Rank #2, it has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few companies worth considering in the broader Zacks Computer and Technology sector, as our model indicates that these possess the right combination of factors to exceed earnings expectations in their upcoming releases:

SanDisk Corporation SNDK is scheduled to report fourth-quarter fiscal 2026 results on Aug. 5. Currently, it has an Earnings ESP of +4.13% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for SanDisk’s fourth-quarter earnings is pegged at $34.24 per share, indicating a year-over-year surge of 11,707%. Earnings estimates for the quarter have been revised upward by 5.7% over the past 60 days. Shares of SanDisk have soared 457.3% year to date (YTD).

Western Digital Corporation WDC is scheduled to report fourth-quarter fiscal 2026 results on Aug. 5. Currently, it has an Earnings ESP of +3.22% and flaunts a Zacks Rank #1.

The Zacks Consensus Estimate for Western Digital’s fourth-quarter earnings is pegged at $3.35 per share, calling for a year-over-year increase of 101.8%. Earnings estimates for the quarter have been revised upward by 3 cents in the past 30 days. Shares of Western Digital have surged 217.5% YTD.

MKS Inc. MKSI is scheduled to report second-quarter 2026 results on Aug. 5. Currently, it has an Earnings ESP of +2.64% and carries a Zacks Rank #2.

The Zacks Consensus Estimate for MKS’ second-quarter earnings is pegged at $2.93 per share, calling for a year-over-year jump of 65.5%. Earnings estimates for the quarter have been revised northward by a penny in the past 30 days. Shares of MKS have rallied 83.5% YTD.

Beyond Nvidia: AI's Second Wave Is Here

The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research