What Happened?
Shares of internet security and content delivery network Cloudflare (NYSE:NET) jumped 5.2% in the afternoon session after stocks extended their rebound, led by strong gains in the technology sector, as renewed optimism surrounding U.S.–China trade negotiations lifted investor sentiment.
Contributing to the bullish sentiment was a standout earnings report from enterprise software leader ServiceNow, which topped Wall Street's expectations on RPO, profit and earnings. More importantly, the company's remaining performance obligations (RPO), a key forward-looking metric for future revenue, gave investors confidence that enterprise customers were not pulling back spending amidst uncertain macro.
The optimism was further reinforced by solid results from Texas Instruments and Lam Research. Their performance was especially encouraging for semiconductor stocks, which had been under pressure due to their exposure to global trade tensions. These results suggested that, despite macroeconomic uncertainties, demand in key tech verticals remained resilient.
The shares closed the day at $118.86, up 5.3% from previous close.
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What The Market Is Telling Us
Cloudflare’s shares are very volatile and have had 23 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was a day ago when the stock gained 8.8% on the news that President Trump clarified that he had no intention of removing Federal Reserve Chair Jerome Powell, a statement that helped calm markets. Earlier remarks had sparked fears of political interference in decision-making at the central bank. With Trump walking back his earlier comments, investors likely felt more assured that monetary policy decisions will continue to be guided by data, not drama. That kept the Fed's word credible, and more importantly, gave investors a steadier compass to figure out where rates and the markets were headed next.
Adding to the positive news, the president made constructive comments on US-China trade talks, noting that the tariffs imposed on China were "very high, and it won't be that high. ... No, it won't be anywhere near that high. It'll come down substantially. But it won't be zero."
Also, a key force at the center of the stock market's massive two-day rally was the frantic behavior of short sellers covering their losses. Hedge fund short sellers recently added more bearish wagers in both single stocks and securities tied to macro developments after the whipsaw early April triggered by President Donald Trump's tariff rollout and abrupt 90-day pause, according to Goldman Sachs' prime brokerage data. The increased short position in the market created an environment prone to dramatic upswings due to this artificial buying force.
A short seller borrows an asset and quickly sells it; when the security decreases in price, they buy it back more cheaply to profit from the difference.
Cloudflare is up 6% since the beginning of the year, but at $119.31 per share, it is still trading 32.4% below its 52-week high of $176.50 from February 2025. Investors who bought $1,000 worth of Cloudflare’s shares 5 years ago would now be looking at an investment worth $5,125.
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