What Happened?
A number of stocks jumped in the afternoon session after the Bureau of Labor Statistics reported that the July Producer Price Index was completely flat month-over-month—coming in below expectations for a 0.2% increase—following the Consumer Price Index print (released earlier in the week) which showed a mild 0.1% monthly increase and an annual inflation rate cooling to 3.4%. Together, the data points suggest price pressures are moderating across both wholesale and consumer levels, taking the urgency out of the Federal Reserve's "higher for longer" rate stance.
For the software and data analytics sector, macroeconomic data often overrides individual company fundamentals on days without earnings. Software companies are generally valued on cash flows expected many years in the future, making them long-duration assets that are highly sensitive to the discount rate used to value those future dollars. When inflation cools, bond yields typically fall as markets price in a less aggressive Federal Reserve.
A lower risk-free rate mathematically boosts the present value of future software earnings, triggering an automatic multiple expansion across the sector.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Tax Software company Intuit (NASDAQ:INTU) jumped 0.8%. Is now the time to buy Intuit? Access our full analysis report here, it’s free.
- Data Storage company MongoDB (NASDAQ:MDB) jumped 3.5%. Is now the time to buy MongoDB? Access our full analysis report here, it’s free.
- Content Delivery company Cloudflare (NYSE:NET) jumped 5.2%. Is now the time to buy Cloudflare? Access our full analysis report here, it’s free.
- Data Analytics company Palantir Technologies (NASDAQ:PLTR) jumped 2.4%. Is now the time to buy Palantir Technologies? Access our full analysis report here, it’s free.
- Advertising Software company The Trade Desk (NASDAQ:TTD) jumped 2.1%. Is now the time to buy The Trade Desk? Access our full analysis report here, it’s free.
Zooming In On Cloudflare (NET)
Cloudflare’s shares are extremely volatile and have had 32 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 6 days ago when the stock gained 7.7% on the news that the company reported a massive second-quarter beat-and-raise, driven by a significant acceleration in forward-looking metrics. During the earnings call, management attributed the 35.9% revenue surge to $696.1 million (a 4.7% beat) and the 34.8% billings growth to $753.5 million to rapid adoption of its Workers developer platform by AI agents. This top-line momentum flowed to the bottom line, with adjusted EPS of $0.29 beating expectations by 7.5%, and adjusted operating income reaching $96.11 million, a 6.1% beat over consensus estimates.
CEO Matthew Prince specifically highlighted that for the first time in history, non-human, machine-to-machine AI traffic accounted for more than 50% of the network's total volume, driving unprecedented consumption and scale as large enterprise customers consolidate legacy point solutions into Cloudflare's unified SASE architecture.
Armed with this accelerating enterprise demand, management lifted its full-year revenue outlook to $2.87 billion at the midpoint and bumped its adjusted EPS guidance to $1.26, while initiating a third-quarter financial outlook that easily trumped the Street's forecasts.
Overall, the blowout print drove a massive rally, prompting Wall Street analysts from firms like Goldman Sachs and Wells Fargo to significantly boost their price targets as Cloudflare solidifies its position as a primary beneficiary of agentic AI infrastructure.
Cloudflare is up 67.4% since the beginning of the year, and at $328.18 per share, it has set a new 52-week high. Investors who bought $1,000 worth of Cloudflare’s shares 5 years ago would now be looking at an investment worth $2,695.
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