Cloudflare delivered a Q1 earnings beat but saw its stock crater after issuing disappointing Q2 guidance. The company posted adjusted earnings of $0.25 per share, above the $0.23 consensus, but forecast growth of up to 30% for Q2, a deceleration from 33.5% in the prior quarter.
Shares fell more than 15% in premarket trading on May 8, 2026, and extended losses to over 18% after hours.
Gross margins hit a record low of 72.8% in Q1, down 4.3 percentage points year over year, as rising AI infrastructure costs ate into profitability. Cloudflare also announced a 20% workforce reduction, citing AI-driven efficiency gains.
Despite the selloff, several brokerages raised price targets, pushing the median to $243, signaling a divide between momentum traders and fundamental analysts. Jefferies flagged near-term growth risks, questioning whether the slowdown is temporary or the start of a sustained deceleration.