The cybersecurity industry benefits from expanding AI demand, Cloudflare raises full-year earnings forecast.

Cloudflare raises full-year profit outlook; this year's large-scale layoffs have not held back growth, and AI demand is becoming the new growth engine for the cybersecurity industry.

On Thursday, U.S. cybersecurity company Cloudflare released its financial report, raising its 2026 full-year adjusted earnings per share outlook from the prior range of $1.19 to $1.20 to $1.25 to $1.26, surpassing Wall Street analysts’ average forecast of $1.20. Second-quarter results also exceeded market expectations.

After the announcement, the company's stock price jumped over 16% after hours, with gains since the start of the year totaling 44%, far outperforming the Russell 1000 Index’s 12% gain over the same period.

No impact on growth after layoffs

In May this year, Cloudflare announced it would cut about one-fifth of its workforce, citing a company transition toward an "AI-agent-centric" operating model. At the time, the move raised concerns in the market about future growth prospects.

Second-quarter results provided the answer—revenues and profits beat expectations, indicating that downsizing and strategic transformation have not hampered business expansion.

CEO Matthew Prince stated, “We delivered an outstanding second quarter.”

AI is rewriting the logic of internet traffic

Cloudflare attributes its accelerated performance to the structural shift in network demand driven by AI.

Matthew Prince said in the statement, “As the internet shifts toward AI answer engines and agent-driven business models, we are witnessing a fundamental re-architecture of the internet to handle machine-to-machine traffic.”

This view points to a core rationale: the large-scale deployment of AI models is spawning massive amounts of automated machine-to-machine traffic, and Cloudflare’s network infrastructure is positioned at the critical nodes of this traffic.

Investors have already responded. According to Bloomberg, interest in large cybersecurity firms has soared this year, driven by the logic that AI is increasing the need for digital defense. At the same time, security vendors are embedding AI into their own products for automated threat detection and response—even as AI models themselves continue to expose new security vulnerabilities, adding to the challenges facing enterprises.

Industry divergence: Fortinet strong, Check Point under pressure

Within the cybersecurity sector, performance has diverged among companies.

Fortinet Inc. also raised its full-year revenue outlook this period, sending its stock price higher. According to Bloomberg, Bloomberg Intelligence analyst Mandeep Singh believes Fortinet may be benefiting from its redefined SASE (Secure Access Service Edge) and firewall businesses, as well as the boost from sovereign demand.

Check Point Software Technologies Ltd., on the other hand, maintained its full-year guidance, with mixed results. Bloomberg reports that TD Cowen notes Check Point is dealing with internal issues, and its performance has disappointed the market.

The performance gap between Fortinet and Check Point reflects the structural divergence within the cybersecurity industry in the AI era—companies that can clearly define and execute an AI strategy are commanding higher market premiums.