Cloudflare (NET) is set to sustain, if not accelerate, topline growth over the next few years due to its market, scalable network and potential as a GenAI enabler as organizations explore large language models, Morgan Stanley said in a note Monday.

The analysts said they expect more AI inference to be done at the "edge," meaning on network devices closer to the end user, to reduce costs and latency, as well as improve data security.

Morgan Stanley also said that although it is still early, the analysts believe AI inference could drive significant growth as adoption increases, especially since Cloudflare serves around 80% of the top 50 GenAI startups.

Cloudflare is just starting to monetize its broad, multi-product platform that targets over $80 billion in spending across security, networking, AI and application services, the analysts said.

Secure Access Service Edge and Developer/AI products are expected to increase from less than 20% of revenue today to over 40% by 2028, driving 25% to 30% long-term revenue growth, according to Morgan Stanley.

"Bottom line, with multiple product cycles in full gear, growing Edge AI contribution, and a fully ramped enterprise sales force ready to address this large opportunity, we think all the cards are aligned for a strong 2025 for Cloudflare with revenue growth potentially accelerating throughout the year," the analysts said.

Morgan Stanley upgraded Cloudflare to overweight from equalweight and raised its price target to $130 from $92.

Shares of the company rose past 6% in recent trading activity.

Price: 106.52, Change: +6.69, Percent Change: +6.70