Cloudflare provides cloud-based network services that protect internet apps and help them to run faster - without requiring clients to add hardware, install new software, or change code. Cloudflare's unified control plane across on-premise, cloud, hybrid, and SaaS data infrastructure environments ensures the security, reliability, and performance of its enterprise customers' external data infrastructure (websites, applications, and application program interfaces), internal networks and devices (identity and access), DevOps, and consumer applications. Cloudflare notes that about 20% of the internet runs behind Cloudflare's intelligent global network. The company seeks to relieve clients of the cost and complexity of managing their own network hardware. Some 51% of the company's revenue is generated outside of the U.S. Cloudflare was founded in 2010 and went public on September 12, 2019, at $15 per share.

Jobs, GDP Stumble, but Earnings Soar The stock market fizzled in July but is off to a strong start in August. Since 1980, July has averaged a 1.4% gain on the S&P 500, making it the fourth-best month (after November, April, and December). But in topsy-turvy 2026, the broad market index closed down 0.1% in July. Since 1980, August has averaged a subfractional gain of 0.03%. This year, and with little more than a week gone by in the eighth month, the S&P 500 is up 3.6% - which, if that return were to be frozen into month-end, would be the best August showing since 2014. So, with the market sizzling not fizzling in August, we can assume jobs growth is off the charts and the economy is booming. Yes? Not quite. July nonfarm payrolls were a dud, and prior-month revisions were substantial. Gross domestic product (GDP) growth for 2Q26 missed consensus and slowed from 1Q26. Granted, there were caveats and asterisks galore, but the bottom line is the U.S. economy grew well under 2% in 2Q26. Earnings growth has been exceptional, but exceptional was expected. For the first time in a while, the U.S. stock market is in one of those weird 'bad is good' phases, where soft economic and jobs data should force the Federal Reserve (Fed) to hold off on hiking interest rates. There is still plenty of time left in 2026 and plenty more chances to end the war with Iran, so nothing is set in stone. Nonfarm Payrolls and GDP Soften The advance (first) GDP report for 2Q26 indicated annualized growth of 1.5%, decelerating from 2.1% in 1Q26. Second-quarter 2026 GDP shows a resilient consumer economy rebounding from a weak first quarter but a commercial economy pulling back slightly from 1Q's aggressive spending on artificial intelligence (AI). President Donald Trump's tariff agenda was complicated by court rulings; the resultant pause in policy enforcement likely contributed to a surge in imports that pulled down 2Q26 GDP. And overall government spending was negative, as this category remains volatile. Second-quarter 2026 Personal Consumption Expenditures (PCE) increased a surprising 3.2%, rebounding sharply from 0.5% in 1Q26. Consumer goods spending rose 5.2% in 2Q26, led by a 6.8% surge in durable goods spending. PCE contributed a strong 2.12 percentage points to 2Q26 GDP, after contributing just 0.37 point in 1Q26. Nonresidential fixed investment, the proxy for corporate capital spending, rose by 8.4% in 2Q26. PCE and nonresidential fixed investment contributed 3.27 percentage points to 2Q26 GDP growth. So why wasn't overall 2Q26 GDP growth stronger? Mainly because of negative trends in key categories of net exports-imports, private inventories, and government spending. The Supreme Court in February 2026 struck down the use of the International Emergency Economic Powers Act (IEEPA) for tariffs, and the White House used Section 122 of the Trade Act of 1974 to implement blanket 10% tariffs. Many companies successfully sued for refunds of tariffs levied under the IEEPA. Tariffs levied under Section 122 of the Trade Act of 1974 expired in July after a 150-day window. The latest White House strategy, to levy 10% tariffs alleging widespread forced-labor violations, may fail in the courts. Global companies took advantage of tariff turmoil in 2Q26 to sharply ramp shipments into the U.S. While exports rose 4.5% in 2Q26, imports rose 11.5%. Government spending also pulled back in 2Q26. Net exports-imports subtracted 1.01 percentage points from 2Q26 GDP, the change in private inventories subtracted 0.67 percentage point, and the decline in government spending subtracted 0.14 point. These three categories subtracted about 2 percentage points from GDP, leading to suboptimal 1.5% growth. After that dud of a GDP report, economists looking for a positive signal from the jobs economy were disappointed by July data. On August 5, 2026, ADP Inc. reported that private payrolls for July rose 44,000, below the 72,000 (midpoint) consensus estimate and down from a revised 95,000 for June. Then came the big shocker: July nonfarm payrolls showed a loss of 23,000 nonfarm jobs, badly missing the consensus forecast of 80,000 new jobs. June payrolls were revised lower by 37,000 to 20,000, and May was reduced by 66,000 to 63,000. As a result, the three-month average for new jobs fell to 20,000 for May-July from 111,000 for April-June. Employment declined in local government, education, manufacturing, and retail trade. Healthcare continued to grow, but at a slower pace. Construction was one of the few growth areas. The unemployment rate declined to 4.1% in July from 4.2% in June, but that may mean that fewer people were looking for jobs. Average hourly earnings growth slowed to 3.2% year over year, which puts it below the annual change in inflation. July nonfarm payrolls may have been impacted by the end of temporary employment for those working during the World Cup, but estimates of that impact vary widely and are inconclusive. Summer can also lead to hiring slowdowns. As for GDP, many economists believe that distortions in imports-exports and private inventories could moderate, allowing underlying strength in consumer and business spending to shine through. That is not a slam dunk, given ongoing uncertainty in tariff policy and the war with Iran. Calendar 2Q26 Earnings Surge The two biggest weeks of earnings season, spanning the end of July through the first week of August, are now in the books. With just under 90% of companies having reported, S&P 500 earnings from continuing operations for calendar 2Q26 are up an astonishing 50% from 2Q25, according to the tracking firms Bloomberg, FactSet, and Refinitiv. That range of blended estimates is based on both actual earnings data and estimates from companies yet to report. That 50% growth rate includes onetime gains from two GAAP-only reporting companies. Alphabet Inc. recognized a $98 billion onetime gain due to net unrealized gains on equity securities. And Amazon.com Inc. recognized a $53 billion gain from investments in Anthropic. Excluding those gains, the blended 2Q26 EPS growth rate is closer to 28% - still the second-best growth since 2Q21. Among companies reporting earnings growth, 86% have surpassed prereporting consensus expectations - well above the 75%-80% range prevailing for the past 10 years. Heading into 2Q earnings season, the consensus of investors was anticipating 23% EPS growth. Backing out those AMZN and GOOGL onetime gains, EPS growth of about 28% is exceeding expectations by about five percentage points - in line with long-term averages. Even after backing out those onetime gains, the 11% EPS beat against expectations is well above the typical EPS beat range of 5%-8%. AI is driving technology earnings growth, but it is not all Magnificent 7. The best AI-driven growth has been coming not from the hyperscalers but from the companies whose hardware - semiconductors, memory & data storage, and networking - supports the transition from generative AI to agentic AI. While AI captures the headlines, an equally important story in this reporting quarter is across-the-board earnings strength, with sectors such as Materials, Energy, Industrial, Financial, and Utilities delivering double-digit EPS growth. In June 2026, we raised our forecast for 2026 S&P 500 earnings from continuing operations to $340 per share from a prior $315. Our 2026 estimate assumes 24.8% growth in continuing operations earnings from 2025. At that time, we also raised our 2027 forecast for S&P 500 earnings from continuing operations to $390 per share from a prior $363. Our 2027 estimate assumes 14.5% growth in continuing operations earnings from our 2026 estimate. Conclusion Investors use the terms 'bad is good' and 'good is bad' typically in the aftermath of economic data that will either compel the Fed to hold steady on interest rates or cut the Fed Funds rate. (It is fairly unusual for investors to be cheering for the Fed to raise rates.) In the 'bad is good' environment we identified above, how good is the bad news for the broad economy, the employment economy, and stocks? Fed Chair Kevin Warsh in July presided over his second Federal Open Market Committee (FOMC) meeting. The new chairman was championed and selected by President Trump, who would like to see more accommodative Fed policy (i.e., lower interest rates). The poor trend in inflation data would appear to argue for more restrictive policy (i.e., higher rates). The FOMC voted to hold rates steady; yet both the Fed chair's postmeeting commentary and recent inflation data appear to support a rate hike. Regarding the broad economy, we are willing to assume that distortions in imports and private inventories muted what was otherwise solid GDP growth. We are a little more wary regarding the jobs economy, which may be showing some concerning tendencies as AI begins to do more and more commonplace tasks. 'Bad is good' was enough to rally the stock market early in August. But with parts of the economy showing soft spots and with war uncertainty still percolating, 'bad is good' is not a strong enough investment strategy into year-end.

Cloudflare is a software company based in San Francisco, California, that offers security and web performance offerings by utilizing a distributed, serverless content delivery network, or CDN. The firm’s edge computing platform, Workers, builds on this infrastructure by enabling clients to deploy and run code without the need to manage or maintain servers.

Cloudflare is a software company based in San Francisco, California, that offers security and web performance offerings by utilizing a distributed, serverless content delivery network, or CDN. The firm’s edge computing platform, Workers, builds on this infrastructure by enabling clients to deploy and run code without the need to manage or maintain servers.