Cloudflare (NET) is expected to deliver on its updated long-term targets, with management saying it remains on track to exceed its $5 billion revenue target ahead of 2028, supported by strength across its security, application, and developer platform businesses, RBC Capital Markets said in a note Tuesday.

At its 2026 investor day, the company adopted a Rule of 50 focus and said it now expects gross margins of 70% to 77%, operating margins above 30%, and free cash flow margins of 30% to 35%, with GAAP profitability expected by 2028, supported by AI-driven efficiency gains across sales, engineering, and corporate functions, according to the note.

A key theme was Cloudflare's "Act 4" opportunity in the agentic internet, where management sees its isolate-based architecture as a structural advantage for efficiently running AI agent workloads, supported by strong AI traffic growth and increasing developer adoption, RBC said.

Underlying momentum remains strong, with Cloudflare One ARR growing 43% year over year and developer platform ARR increasing 137%, alongside rising enterprise adoption and stronger net revenue retention driven by wider product uptake, the brokerage added.

RBC Capital Markets maintained its outperform rating on the stock and raised its price target to $260 from $240.

Shares of Cloudflare were down 5.8% in Wednesday trading.

Price: 222.38, Change: -13.76, Percent Change: -5.83