Cloudflare Climbs 6% as Cloud Stocks Rebound; Datadog Rises 5%, Snowflake Edges Higher
Cloud stocks are bouncing back, and Cloudflare is pulling away from the pack with a surge that towers over the broader ETF gains. But a massive restructuring charge and shrinking margins raise a pointed question about how long that lead…
Cloud software stocks are rallying, and the biggest gains belong to the companies that keep applications running and secure. Shares of Cloudflare (NYSE:NET | NET Price Prediction) are up 6% to $323 early in the session. That puts the network company at the front of the cloud group’s recovery.
Meanwhile, Datadog (NASDAQ:DDOG) stock is up 5% to $270.81, a solid advance that still trails Cloudflare shares. Both companies draw on cloud budgets from different directions. Cloudflare runs a global network that delivers and secures internet traffic, while Datadog sells cloud monitoring software.
Fund figures show how concentrated the rally is. The First Trust Cloud Computing ETF (NASDAQ:SKYY) is up 2% to $167.39, a smaller gain than Cloudflare stock is posting. At the same time, the Invesco QQQ Trust (NASDAQ:QQQ) is up 0.6% to $708.46, marking a quieter move for large-cap technology.
Cloud Rebound Puts Cloudflare Ahead of Datadog
Cloudflare stock is outpacing Datadog stock as the cloud group bounces back, and the recovery follows a slip for cloud software names in the previous session. Buying across the group looks broad, with Cloudflare drawing the strongest demand.
In its Q2 2026 results, reported August 6, Cloudflare posted revenue of $696.1 million, up 35.9% year over year, and raised its full-year 2026 sales outlook to $2.86 billion to $2.87 billion. Management tied that momentum to AI answer engines and agent-driven commerce, a theme that gives Cloudflare a growth story beyond traditional web security.
Agent Traffic Gives Cloudflare a Distinct Edge
Matthew Prince, Cloudflare’s CEO at the time of its August 6 earnings call, framed the company’s opportunity around machine traffic. He stated, “For the first time in human history, in Q2, more than 50% of the traffic flowing across Cloudflare’s network was not human.” That shift puts Cloudflare as core infrastructure for AI agents.
Risks show up in Cloudflare’s own numbers. Cloudflare booked a $150.7 million restructuring charge in Q2 tied to its shift to an “agentic AI-first operating model,” while non-GAAP gross margin slipped to 73.1% from 76.3% a year earlier. Those pressures leave Cloudflare stock less room for error if growth cools.
Datadog’s story leans on a different budget line, with software that tracks applications, infrastructure, AI models and security in one platform. Olivier Pomel, Datadog’s CEO at the time of its most recent quarterly report, stated, “Our customers are building and deploying with AI, and they are using the Datadog platform to observe, secure, and act on their AI-enabled solutions.” Competition in observability and security, along with potential pressure on IT spending, is among the risks Datadog has highlighted.
Snowflake (NYSE:SNOW), a fellow cloud software company focused on data and AI workloads, shares a home with Cloudflare and Datadog inside the SKYY ETF. The First Trust Cloud Computing ETF held Cloudflare at a 2.7% weight as of June 30, compared with 0.7% for Datadog and 0.7% for Snowflake. A bigger weighting gives Cloudflare stock more pull on the ETF. SNOW shares are up 2% to $318.92.
Cloudflare’s Q3 Report Is the Next Big Test
Cloudflare’s Q3 2026 report, expected November 5 after the close, will show whether Cloudflare stock can hold its gains. Management guided third-quarter revenue to $736 million to $737 million. Beating that range could support Cloudflare shares, while a shortfall may pressure them.
Datadog’s own quarterly report, expected November 4 before the market opens, is the open question. The question now is whether Datadog’s update continues the cloud rallying a day ahead of Cloudflare’s numbers.
Heading into that stretch, Cloudflare stock has strong momentum, along with a restructuring charge and thinner margins. Investors considering their NET stock exposure may want to keep their position sizes modest until Cloudflare’s third-quarter report is released.
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David Moadel is financial writer specializing in stocks, ETFs, options, precious metals, and Bitcoin. David has written well over 1,000 articles for leading online publications, helping investors understand markets, income strategies, and risk.His work has appeared in The Motley Fool, InvestorPlace, U.S. News & World Report, TipRanks, ValueWalk, Benzinga, Market Realist, TalkMarkets, Finmasters, 24/7 Wall St., and others.With a master’s degree in education, David has taught at the elementary, high school, and college levels. That teaching background shapes his writing style: clear, educational, and practical. David has also built a loyal social-media audience by providing trustworthy financial content on YouTube, X/Twitter, and StockTwits.
