Cloudflare told investors on 6 August that more than half the traffic now crossing its network is generated by AI agents rather than people. The company — a cloud network that sits between the public internet and its customers' websites, selling denial-of-service protection, firewalls, content delivery and a serverless developer platform on one fabric — reported June-quarter revenue of $696.1m, up 35.9% year over year. That was the fourth consecutive quarter of accelerating growth.

Almost everything underneath it improved too. Dollar-based net retention reached 120%, up six points in a year. Customers spending more than $100,000 annually numbered 4,698, a 27% increase with a record 986 net additions. Non-GAAP gross margin rose 30 basis points sequentially to 73.1% — the first sequential gain in eight quarters, after two years of dilution from unpaid network traffic.

What Cloudflare is actually selling

The deals management named are not delivery bids. A five-year, $31.8m contract with a digital media company; an $11m European renewal that consolidated five legacy vendors; a $7.7m federal win. Cloudflare wins by replacing several point products at once, which is why it can grow while published content-delivery pricing runs between $0.002 and $0.085 a gigabyte depending on commitment and region.

What it does not sell, at least visibly, is AI inference revenue. Workers AI, AI Gateway, R2 storage and the pay-per-crawl toll on AI training bots — the products the valuation is credited to — carry no separate disclosed revenue line. What investors got instead was developer counts: 7.4 million on the Workers platform, about two million added in the quarter. In July the company switched pay-per-crawl to a pay-per-use model that pays publishers when content is used to answer a question. No figure attached.

Three sessions

Cloudflare's shares have held an uptrend since 5 May, its 50-day average above its 200-day for 71 straight sessions — the longest such run since 2025. Over those 71 sessions the stock rose 16.45%. Remove three of them and the other 68 compound to minus 12.18%. The three are 28 May, 1 June — when Nvidia's Computex keynote put agentic AI on an autumn timetable — and 7 July, its analyst day, when RBC framed more than $5bn of revenue before 2028.

Neither earnings print helped. The stock fell 24% on 8 May on a soft guide, a gross margin of 72.8% against a 75.1% estimate, and a plan to cut roughly a fifth of staff. It fell 3.7% on 6 August. Price-to-trailing-gross-profit has gone from 38.5x in February to 43.4x in May to 55.4x now, touching about 64x on 13 August.

Akamai earns its de-rating; Fastly does not

Akamai, the 1998-vintage delivery pioneer whose 4,400 points of presence sit inside carrier last-mile networks, now rents that footprint as GPU capacity. Revenue grew 5.4% to $1.10bn last quarter, but trailing gross profit went backwards by 0.5% and GAAP operating income fell 47% to $80.3m as capex hit 32% of revenue. Delivery shrank 6%; Cloud Infrastructure Services, at $99m, grew 39%. Against that sits $2.8bn of signed multi-year compute commitments, including a seven-year, $1.8bn contract with Anthropic — revenue that begins ramping in the fourth quarter. The shares are down 22.2% over three months and fetch 6.66x trailing gross profit, 16.7x forward earnings.

Fastly, the smaller edge vendor serving publishers, media and e-commerce, is the control that breaks the story. Its revenue grew 23.3% to $183.3m, the fastest in four years. Gross margin widened 1,193 basis points to 63.25%, so gross profit grew 51.9%. Net retention improved for a fifth quarter to 117%, and management described price erosion as mid-single-digit and driven by volume tiers, not competitive attack. Concentration is the flaw: the top ten customers are 37% of revenue and grew 48%, while everyone else grew 12%. The stock fell 12.7% on 19 August and 9.2% on 20 August with no company announcement to explain it, and at 8.48x gross profit remains dearer than in February.

The last week is about bonds

All three peaked within a session of one another, Cloudflare on 13 August, the other two on 14 August. On 18 August the 30-year Treasury yield topped 5.33%, a 19-year high. A higher discount rate falls hardest on companies whose earnings sit furthest out — which describes the most expensive of these three far better than the cheapest.

The setup

Where it stands — Cloudflare's fundamentals accelerated all year; its multiple expanded faster, and the expansion traces to three narrative sessions. Would confirm — A disclosed Workers AI, R2 or pay-per-use revenue line, or non-GAAP gross margin rising sequentially again in the third quarter. Would invalidate — Third-quarter revenue below the $736-737m guide, or net retention slipping back from 120%. Watch next — Akamai's fourth-quarter results, when the $2.8bn of compute backlog is scheduled to begin converting into revenue. Valuation — Cloudflare at 55.4x trailing and 48.5x forward gross profit, versus 38.5x in February and 6.66x for Akamai.