Cloudflare experienced a pullback as market participants engaged in profit-taking following a powerful multi-week rally that pushed the stock to record highs. The equity had recently been energized by strong second-quarter earnings, which featured accelerating year-over-year top-line growth, robust adoption among large enterprise clients, and an upgraded full-year revenue outlook driven by surging demand for AI infrastructure and edge computing tools. However, after a rapid price surge, the momentum encountered natural resistance as investors secured profits.

Underpinning the current pressure is heightened scrutiny surrounding the company’s valuation metrics. While non-GAAP operating margins expanded and management raised guidance, GAAP…