Cloudflare (NYSE:NET) shares are down on Tuesday. The company announced a partnership with Wiz to enhance AI security measures and launched Cloudflare Mesh.

• Cloudflare shares are experiencing downward pressure. Why is NET stock retreating?

Partnership With Wiz

The partnership aims to provide organizations with a unified approach to identify and mitigate AI risks in real-time, integrating Cloudflare’s AI Security for Apps directly into Wiz’s Security Graph.

This integration allows for seamless security enhancements without the need for additional workflows or agents, empowering security teams to better manage their AI application environments.

“AI is the most transformative technology we’ve seen in a generation, powering countless capabilities. But for a majority of businesses, it can be a black box,” said Tom Evans, chief partner officer at Cloudflare. “When talking with CISOs today, they are struggling with the balance of being an enabler of innovation with AI, while combating uncontrolled shadow AI across their organization because their legacy security tools are effectively useless at this level.”

“The Cloudflare and Wiz partnership helps tackle this trade-off. Now, we are delivering a solution to allow innovation with AI at speed, without the worry that their most sensitive data will be exposed.”

Cloudflare Mesh Launch

In a separate release, Cloudflare introduced Cloudflare Mesh, positioning it as a way for developers to encrypt every human, code and agent connection point without exposing internal infrastructure and data to the public internet.

The company says Mesh integrates with its Developer Platform, including Workers, Workers VPC, and the Agents SDK to offer an end-to-end lifecycle for AI agents.

Matthew Prince, co-founder and CEO of Cloudflare, added, “For years, developers have been stuck with the choice between wasting days wrestling with complex, clunky VPNs or taking the dangerous shortcut of exposing private infrastructure to the open web.”

”Now, Cloudflare Mesh removes that trade-off. We are providing a secure bridge between agents and infrastructure — whether those agents are running on Cloudflare, in a private data center, or in another public cloud — ensuring every agent a team ships is secure from day one,” added Prince.

Technical Analysis

The broader market is experiencing gains, with the Technology sector up 1% today. Cloudflare’s decline contrasts with this positive trend, suggesting that specific concerns regarding its partnership may be impacting investor sentiment.

Cloudflare is currently trading 30.6% below its 20-day simple moving average (SMA), indicating a bearish short-term trend. Additionally, the stock is 6.9% below its 50-day SMA and 7.2% below its 100-day SMA, which further suggests weakness in both the intermediate and longer-term trends.

The relative strength index (RSI) stands at 42.61, which is considered neutral, indicating that the stock is neither overbought nor oversold at this time. This positioning suggests that there may be potential for either upward or downward movement depending on future market conditions.

  • Key Resistance: $203.50 — This level has historically been a barrier for upward price movement.
  • Key Support: $159.00 — This level may provide a safety net for buyers if the stock declines further.

Over the past 12 months, Cloudflare has gained 68.19%, reflecting strong long-term performance despite recent volatility. The stock’s current price is also situated above its 52-week low of $100.25, indicating that it remains well above its lowest point in the past year.

Sector Performance

Cloudflare is underperforming relative to the Technology sector, which is currently ranked three out of 11 sectors. The sector has shown a positive trend over the past 30 days, increasing by 5.97%, indicating a strong recovery and investor interest in technology stocks overall.

Despite the sector’s strength, Cloudflare’s recent partnership announcement has not translated into positive momentum for the stock, suggesting that investor sentiment may be influenced by specific concerns related to the integration and its implications for security management.

Earnings & Analyst Outlook

Looking further out, the next major catalyst for the stock arrives with the May 7 earnings report.

  • EPS Estimate: 12 cents (Down from 16 cents)
  • Revenue Estimate: $622.45 million (Up from $479.09 million)

Analyst Consensus & Recent Actions: The stock carries a Buy Rating with a consensus price target of $223.16. Recent analyst moves include:

  • Mizuho: Outperform (Lowers Target to $235 on April 14)
  • Citigroup: Buy (Raises Target to $265 on Feb. 12)
  • Jefferies: Hold (Raises Target to $225 on Feb. 11)

Top ETF Exposure

  • Amplify Cybersecurity ETF (NYSE:HACK): 4.87% Weight
  • American Century Mid Cap Growth Impact ETF (NYSE:MID): 6.18% Weight
  • WisdomTree Cybersecurity Fund (NASDAQ:WCBR): 4.91% Weight

Significance: Because NET carries such a heavy weight in these funds, any significant inflows or outflows will likely trigger automatic buying or selling of the stock.

NET Stock Price Activity: Cloudflare shares were down 2.23% at $179.91 at the time of publication on Tuesday, according to Benzinga Pro data.

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