Cloudflare (NET, Financial) shares climbed around 3% on Wednesday following an upgrade from Mizuho, which raised its rating on the stock to Outperform from Neutral. The firm cited stronger-than-expected momentum in AI-related initiatives and signs of accelerating business activity.

Despite lowering its price target slightly to $135 from $140, Mizuho sees positive developments ahead. Analysts pointed to more encouraging internal checks, including a healthier sales pipeline, growing large-deal activity, and increasing adoption of Cloudflare's Workers AI offering.

The team at Mizuho believes Cloudflare's underlying technology stack is highly scalable and backed by a strong innovation culture. They're particularly optimistic about the company's role in AI inferencing, where it may capture growing demand.

Even with broader macroeconomic uncertainty, Mizuho expressed more confidence in Cloudflare's multi-year growth trajectory. The recent dip in share price — down 38% since mid-February, underperforming both the broader Nasdaq and the IGV software ETF — creates what the analysts see as a favorable entry point for investors.

The firm's call reflects a belief that Cloudflare is positioned to benefit as AI-driven demand continues to reshape cloud infrastructure and security markets.

It's important to note that Cloudflare soared 15.21% over the past week, outpacing the S&P 500's 7.10% gain. However, the stock pulled back by 3.34% on a monthly basis, compared with the broader market's steeper 5.36% decline, before rebounding for a solid 19.69% six-month performance and 4.28% year to date.