08:16 AM EDT, 07/11/2025 (MT Newswires) -- Cloudflare's ( NET ) relentless pace of innovation and evolution into a multi-product platform strategy position the company best to capitalize on the emerging AI opportunity and navigate the current market landscape, Morgan Stanley said in a note Friday.

Morgan Stanley said CloudFlare ( NET ) has strong financial performance, with average year-over-year revenue growth of 32% and a 9% free cash flow margin over the last eight quarters.

Morgan Stanley analysts argue that Cloudflare's ( NET ) ability to quickly launch new products, adapt its business model, and expand into high-growth markets such as edge AI and cybersecurity distinguishes it from competitors and justifies a premium valuation.

The company manages and secures more than 20% of global internet traffic, giving it a long-term data advantage and a leading market position, Morgan Stanley added. Unlike many competitors, Cloudflare ( NET ) has achieved this expansion with minimal M&A spend-about $136 million since 2018-while others like Palo Alto Networks and CrowdStrike have spent billions.

Cloudflare's ( NET ) platform now addresses a total addressable market of over $116 billion, with edge AI and security already making up about two-thirds of new customer annual contract value, Morgan Stanley added.

Morgan Stanley sees Cloudflare ( NET ) as one of the most compelling secular growth stories in software, with multiple levers driving both revenue and margin expansion.

The firm raised its price target on Cloudflare ( NET ) to $225 from $150 and reiterated its overweight rating.