Artificial intelligence (AI) spending is set to hit $631 billion by 2028, according to market research firm IDC. This presents a massive opportunity for investors to benefit from the growth of AI technology. One company that stands out is Cloudflare.
The company is leveraging its cybersecurity experience to bolster its prospects in the cloud AI space. In September last year, Cloudflare launched the Workers AI platform, which allows developers to run AI inference applications on its network. Cloudflare has been procuring Nvidia’s graphics processing units (GPUs) and networking switches to build an edge AI network across cities worldwide.
This infrastructure allows developers to create AI applications without purchasing their own hardware. The company’s edge AI network now spans 180 cities globally, with potential for growth given Cloudflare’s presence in 300 cities. Cloudflare intends to enable organizations to deploy AI models powered by Nvidia GPUs without worrying about managing, scaling, optimizing, or securing deployments.
Cloudflare’s AI-driven growth strategy
Cloudflare has also announced a new AI offering called AI Audit. This tool will allow websites and content creators to see how AI bots access and use their content, giving them the ability to block access or charge for the content that AI bots are accessing.
When Cloudflare announced its second-quarter 2024 results in August, the company reported a 30% year-over-year increase in revenue to $401 million. The company’s adjusted earnings doubled year-over-year to $0.20 per share. The number of Cloudflare customers with more than $100,000 in annualized revenue stood at 3,046 in the second quarter, up 30% year-over-year.
Moreover, the company’s dollar-based net retention rate of 112% in Q2 indicates that its existing customers are either increasing their adoption of Cloudflare’s new offerings or using more of its current services. Given Cloudflare’s growing portfolio of AI offerings, there is a good chance that the company will maintain its robust growth in the long run. Analysts expect Cloudflare’s earnings to increase at an annual rate of 62% for the next five years.
Investors looking to add a growth stock to their portfolios would do well to consider Cloudflare before it accelerates following a flat performance in the market so far in 2024.
