Cloudflare stock rises after Scotiabank upgrades on AI outlook

Cloudflare shares climbed 7% on Tuesday after Scotiabank upgraded the company to Sector Outperform from Sector Perform and raised its price target to $300 from $225. The brokerage cited Cloudflare’s expanding role in artificial intelligence infrastructure and developer tools as the basis for the change.

Scotiabank analyst Patrick Colville wrote that a deeper review over several weeks convinced him Cloudflare is positioned for the next phase of AI-driven web services. He added, “We upgrade our rating on the common shares of Cloudflare to Sector Outperform and lift our price target to $300.” The note highlighted recent product work and customer wins as reasons for the upgrade.

The firm’s report identified three specific drivers of potential revenue growth: wider adoption of the Workers serverless platform for AI-generated applications, traffic increases tied to agentic AI that historically precede revenue by about three quarters, and the company’s ability to attract AI-native customers. Scotiabank projected these trends could enable Cloudflare to outperform consensus revenue estimates by roughly five percentage points in the second half of 2026.

Cloudflare introduced Monetization Gateway on July 1, expanding its Pay Per Crawl service into a Pay Per Use model using the open x402 protocol. The feature is designed to let website owners charge automated AI agents for access on a per-use basis. Monetization Gateway is in early access and available by waitlist.

The brokerage noted Cloudflare trades at a high forward price-to-earnings ratio, about 204.19, and described the valuation as elevated. Scotiabank nonetheless cited accelerating AI adoption, improving traffic trends and product development as reasons for a more positive rating.

The upgrade comes amid heightened investor focus on companies supplying infrastructure and tools for AI development. Scotiabank’s note said winning prominent AI-native customers would validate Cloudflare’s architecture and extend its growth runway, while also warning that many of the initiatives discussed remain early in their commercialization cycle.