Cloudflare raised its financial forecast after reporting stronger-than-expected earnings driven by AI-related customer spending.

Cloudflare's shares surged 16% in premarket trading Friday after the cloud services firm raised its annual forecasts, signaling confidence that accelerating enterprise spending on AI infrastructure will fuel demand for its networking and security products.

The company now expects full-year revenue between $2.86 billion and $2.87 billion, up from its prior guidance of $2.805 billion to $2.813 billion. It also raised adjusted earnings per share guidance to a range of $1.25 to $1.26, compared with its earlier estimate of $1.19 to $1.20.

The results underscore a broader shift in which AI adoption is driving demand beyond chipmakers to infrastructure and software providers supporting AI application development and deployment. Cloudflare's forecast raise comes on the heels of Amazon.com reporting its strongest cloud growth in more than four years, with the company noting it lacks sufficient capacity to meet all customer demand this year.

Cloudflare added approximately 2 million developers in the second quarter alone, outpacing the 1.5 million it added in the comparable period last year. Morgan Stanley analysts highlighted the company's Workers developer platform as the fastest-growing segment, noting a shift toward usage-based pricing that positions Cloudflare to exceed its outlook.

Security represents another avenue for growth as enterprises increasingly seek to protect AI-powered applications and workers from sophisticated cyber threats. TD Cowen analysts noted that Cloudflare is "well-positioned to play a lead role as AI unfolds."

Shares have gained over 44% year-to-date, though they trail CrowdStrike's 77% rise and Palo Alto Networks' 95% jump. At roughly 190 times forward price-to-earnings, the stock commands a premium relative to CrowdStrike's 145x multiple. RBC Capital Markets analysts contend the valuation is warranted, citing that Cloudflare "has multiple, durable avenues to AI monetization over the long-to-medium term."