Cloudflare's Short Interest and Its Implications for a Potential Short Squeeze

The interplay between short interest and stock price dynamics has long been a focal point for investors assessing market sentiment and risk. For Cloudflare (NET), recent data reveals a nuanced picture of short seller positioning and its potential implications for a short squeeze. This analysis delves into the latest metrics, volatility patterns, and institutional activity to evaluate the likelihood of such an event.

Short Interest Metrics: A Moderate but Watchable Position

As of November 2025, Cloudflare's short interest stands at 9.13 million shares, representing 3.26% of its shares outstanding and 2.93% of its float. According to market data, this level is below the 10% threshold typically associated with extreme bearishness, but still reflects a notable presence of short sellers in the market. The short interest ratio (SIR)-a metric that estimates the number of days required to cover short positions based on average daily trading volume-ranges between 3.55 and 4.41. This suggests that, under current trading conditions, short sellers would need approximately 3.5 to 4.4 days to unwind their positions.

Notably, short interest has shown a modest decline in recent months. From October 15 to October 31, 2025, the shorted shares decreased from 9.52 million to 9.13 million, reflecting a 2.0% reduction. This trend indicates a gradual erosion of bearish sentiment, potentially driven by improved investor confidence in Cloudflare's fundamentals or broader market conditions.

Volatility and Investor Sentiment: A Double-Edged Sword

Cloudflare's stock has exhibited pronounced volatility in recent months, with a beta coefficient of 1.96-significantly higher than the S&P 500 benchmark. This elevated volatility, while attractive to risk-tolerant investors, also amplifies the potential for sharp price swings that could trigger a short squeeze.

Recent price action underscores this dynamic. In November 2025, the stock fluctuated between $185.23 and $213.70, with a 1.65% weekly gain and a 2.17% jump on December 10, 2025. Analyst activity has further complicated the sentiment landscape. For instance, Barclays initiated an "Overweight" rating with a $235 price target on December 2, 2025, while Oppenheimer resumed an "Outperform" rating earlier in November. These divergent signals highlight the market's uncertainty about Cloudflare's near-term trajectory.

Short Squeeze Dynamics: Risk and Reward in Balance

A short squeeze occurs when a stock's price rises rapidly, forcing short sellers to cover their positions by purchasing shares, which can drive the price even higher. For Cloudflare, the current short interest levels and volatility create a moderate risk profile for such an event.

The short interest ratio of 3.55–4.41 implies that a significant price surge would not immediately overwhelm the market with covering demand. However, Cloudflare's beta of 1.96 suggests that even a modest upward move could accelerate into a sharper rally, particularly if positive news or analyst upgrades gain traction. For example, Barclays' $235 price target-a 10.5% premium to Cloudflare's December 10 closing price-could incentivize short sellers to exit positions preemptively, exacerbating upward momentum.

Institutional activity also plays a role. Entities like Mission Wealth Management LP, Jane Street Group LLC, and Balyasny Asset Management L.P. hold short positions in Cloudflare. If these players face margin calls or strategic reallocations, their forced buying could amplify a short squeeze.

Investor Implications: Navigating the Risks

For investors, the key takeaway is that Cloudflare's short interest, while not alarmingly high, introduces a layer of asymmetric risk. A short squeeze could lead to volatility spikes, benefiting long positions but increasing downside risks for shorts. Conversely, if Cloudflare's fundamentals fail to meet expectations-such as missing revenue targets or facing regulatory headwinds-the current short interest could intensify downward pressure.

The mixed analyst sentiment further complicates the outlook. While upgrades like Barclays' "Overweight" rating signal optimism, they also risk being dismissed if Cloudflare's execution falters. Investors should monitor short interest updates (published twice monthly by FINRA) and institutional positioning for early signs of shifting sentiment.

Conclusion: A Watchful Eye on a Dynamic Market

Cloudflare's short interest and volatility profile present a compelling case study in market dynamics. While the current short interest ratio and percentage of shares shorted suggest a moderate risk of a short squeeze, the stock's beta and recent price action underscore the potential for rapid, unpredictable movements. Investors must weigh these factors against Cloudflare's fundamentals and broader market conditions. In a landscape where sentiment can pivot swiftly, vigilance and adaptability will be critical.