Cloudflare (NET) Surges 3.18%: AI-Driven Breakout or False Dawn?

Summary
• Cloudflare (NET) trades at $201.605, up 3.18% intraday, breaking above its 30-day moving average of $196.74
• Zacks highlights revised earnings estimates and 26.7% revenue growth forecasts for FY2025
• Options chain sees heavy volume in $205 and $210 call options, with leverage ratios exceeding 50%

Cloudflare’s sharp intraday rally reflects a confluence of earnings optimism and sector-wide AI infrastructure tailwinds. The stock’s 3.18% surge—its highest since March 2025—coincides with Zacks’ revised revenue growth forecasts and a surge in call option activity. With the 52-week high at $219 still in reach, traders are weighing whether this breakout signals a reacceleration in the AI-driven cloud security story.
AI Infrastructure Tailwinds and Earnings Optimism Fuel Rally
Cloudflare’s intraday surge stems from a combination of upwardly revised earnings estimates and sector-specific AI infrastructure momentum. Zacks notes the company’s current fiscal year revenue growth forecast of 26.7%—driven by its AI strategy and large customer expansion—and a Zacks Rank 3 (Hold) rating based on stable earnings revisions. Meanwhile, sector news about AI energy demands and infrastructure spending (e.g., Cisco’s AI network operations vision) has amplified investor appetite for cloud infrastructure plays. The stock’s 3.18% gain also reflects its outperformance against the Zacks Internet - Software industry’s 6.1% monthly gain, suggesting selective momentum in high-growth subsectors.

Internet Services Sector Mixed as Akamai Trails
The Internet Services and Infrastructure sector shows divergent momentum, with Cloudflare outpacing its peers. While the Zacks Internet - Software industry has gained 6.1% over the past month, sector leader Akamai Technologies (AKAM) trades down 0.09% intraday. This contrast highlights Cloudflare’s unique positioning in AI-driven infrastructure, where its 26.7% revenue growth forecast outpaces the sector’s average. The divergence suggests investors are prioritizing companies with clear AI scalability and high-margin cloud security offerings.

Options and ETFs for Navigating Cloudflare’s AI-Driven Volatility
• 200-day average: $139.55 (well below current price)
• RSI: 47.32 (neutral, no overbought/oversold signals)
• MACD: 3.79 (bullish divergence from signal line at 5.43)
• Bollinger Bands: Current price at $201.315, near the middle band ($200.88), suggesting consolidation before a breakout

Cloudflare’s technicals point to a short-term consolidation phase ahead of a potential breakout. The stock is trading within its 30-day support/resistance range ($190.95–$191.63) but has broken above the 200-day average, signaling long-term bullish momentum. For traders, the key levels to watch are the 52-week high of $219 and the 200-day average. The T-Rex 2X Long NFLX Daily Target ETF (NFLU), up 1.69%, could serve as a leveraged proxy for broader tech infrastructure exposure.

Top Options Picks:
• NET20250822C205
- Type: Call
- Strike Price: $205
- Expiration: 2025-08-22
- IV: 42.04% (moderate)
- Leverage Ratio: 57.53% (high)
- Delta: 0.4042 (moderate sensitivity)
- Theta: -0.721 (high time decay)
- Gamma: 0.0309 (high sensitivity to price changes)
- Turnover: $91,376
- Payoff at 5% Upside: $201.315 → $211.38 → max(0, $211.38 - $205) = $6.38 per share
- Why: High leverage and gamma make this ideal for a 5% upside scenario, with liquidity to enter/exit.
• NET20250822C210
- Type: Call
- Strike Price: $210
- Expiration: 2025-08-22
- IV: 43.04% (moderate)
- Leverage Ratio: 98.22% (very high)
- Delta: 0.2698 (low sensitivity)
- Theta: -0.545 (moderate time decay)
- Gamma: 0.0258 (moderate sensitivity)
- Turnover: $9,784
- Payoff at 5% Upside: $201.315 → $211.38 → max(0, $211.38 - $210) = $1.38 per share
- Why: Aggressive play for a larger move, with high leverage but lower delta for directional bets.

Trading Setup: Aggressive bulls should target the NET20250822C205 for a 5% upside scenario, while the NET20250822C210 offers high leverage for a larger move. Both contracts benefit from high gamma and moderate IV, making them responsive to price swings. If $205 breaks, consider rolling into the $210 call for extended exposure.

Backtest Cloudflare Stock Performance
The backtest of NET's performance after a 3% intraday surge shows a strategy return of 63.70%, with a benchmark return of 83.70% and an excess return of -20.00%. The strategy has a CAGR of 10.60% and a maximum drawdown of 0.00%, indicating a volatile but potentially profitable trajectory. The Sharpe ratio of 0.51 suggests a reasonable risk-adjusted return, while the high volatility of 20.72% highlights the strategy's sensitivity to market movements.

Breakout or False Dawn? Watch $205 and Sector Sentiment
Cloudflare’s 3.18% intraday surge reflects a mix of earnings optimism and AI infrastructure tailwinds, but sustainability depends on breaking above $205 and maintaining momentum against a weak sector leader like Akamai (down 0.09%). Traders should monitor the 200-day average ($139.55) as a long-term bullish signal and the 52-week high ($219) as a near-term target. For now, the NET20250822C205 and NET20250822C210 offer leveraged exposure to a potential breakout, but caution is warranted if the stock fails to hold above $200.88 (Bollinger middle band). Action: Buy the NET20250822C205 if $205 breaks within 48 hours; otherwise, watch for a pullback to $195.0 (intraday low).