In This Article:
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Cloudflare stock can jump higher thanks to the fast-growing demand for its cloud-based AI infrastructure solutions.
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The company is scratching the surface of a massive opportunity in the serverless GPU market.
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Cloudflare's rapidly improving revenue pipeline indicates it is set for stronger growth in the future.
The past month has been a solid one for Cloudflare (NYSE: NET) investors as share prices of the company have shot up an impressive 39%. Even better, it looks like its impressive rally is here to stay following the release of its latest quarterly results.
Cloudflare reported its first-quarter 2025 results on May 8, and the stock price popped more than 6% the following day. The company, which is known for providing internet infrastructure solutions such as content delivery networks (CDNs) and cloud security offerings, saw a sharp increase in its revenue pipeline in recent quarters thanks to its focus on offering artificial intelligence (AI) solutions to customers.
It's AI efforts are likely the reason why Cloudflare stock shot up despite a mixed quarterly report. Let's check why investors are bullish about this cloud stock's prospects.
Cloudflare's Q1 earnings remained flat year over year and were in line with Wall Street's expectations. Its revenue jumped 27% from the year-ago period to $479 million and beat the consensus estimate of $469 million. However, the terrific growth in the company's remaining performance obligations (RPOs) is probably the reason why investors were in a cheerful mood following its report.
Specifically, Cloudflare reported a big year-over-year increase of 39% in its RPO in Q1. That was substantially higher than the increase in the company's top line last quarter and was an improvement over the RPO growth it reported in the preceding quarter. Moreover, Cloudflare's RPO of $1.86 billion points toward a robust revenue pipeline as this metric refers to the total value of a company's contracts that are yet to be fulfilled.
Management said it saw a solid increase in the demand for its Workers AI platform, which explains why Cloudflare's revenue pipeline is rising at a healthy pace. Workers AI gives Cloudflare customers access to powerful hardware, including graphics processing units (GPUs) they can use to develop AI applications with the help of popular large language models (LLMs) and run AI applications closer to users for faster performance and low latency.