What Happened?
Shares of cloud security and performance company Cloudflare (NYSE: NET) fell 2.7% in the afternoon session after the Federal Reserve cut its benchmark interest rate by a quarter-point, while signaling one rate cut in 2026 which was lower than expected.
The widely anticipated move put the new target range for the federal funds rate at 4% to 4.25%. Policymakers cited a weakening labor market and moderating economic growth as the primary reasons for the cut, signaling a shift in their approach to support the economy. However, they also noted that inflation "has moved up and remains somewhat elevated," creating a conflict as the committee balances its dual mandate of stable prices and full employment.
Investors continued to look for clues on the pace of future rate cuts as the Fed tries to balance a slowing job market with ongoing inflation. Most Fed Committee members have indicated they expect two more cuts for the year.
The Fed's "dot plot" also suggests a much slower pace of cuts than the market currently anticipates. With only one cut implied for 2026 compared to the three that traders priced in, this explained the market pullback after the initial spike that followed the rate cut announcement.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.
The shares closed the day at $213.87, down 2.5% from previous close.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Cloudflare? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Cloudflare’s shares are very volatile and have had 24 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 19 days ago when the stock dropped 2.8% as a broad-based selloff in the technology sector pulled the wider market down from recent all-time highs. The decline was not driven by company-specific news but rather by a wider market retreat, with the tech-heavy Nasdaq 100 sliding approximately 1.4% and the S&P 500 falling nearly 1%.
The negative sentiment in the sector was intensified by disappointing updates from other major technology companies. For example, Dell Technologies' stock slid on concerns over profit margins, while Marvell Technology issued a revenue outlook that fell short of expectations, raising concerns about its data center business. This broader tech rout weighed on stocks across the industry, including Cloudflare, as investors took profits following a recent rally to record highs.
Cloudflare is up 90.6% since the beginning of the year, and at $214.50 per share, it is trading close to its 52-week high of $226.01 from September 2025. Investors who bought $1,000 worth of Cloudflare’s shares 5 years ago would now be looking at an investment worth $5,942.
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