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Market Data Table

Breakfast News: Cloudflare’s AI Pivot Spooks Stock

May 8, 2026

Thursday's Markets
S&P 500 7,377 (-0.38%)
Nasdaq 25,806 (-0.13%)
Dow 49,597 (-0.63%)
Bitcoin $81,463 (-0.26%)

Chart showing Cloudflare's gross profit margin staying mostly flat over the past three years, starting at 75.62% in the second quarter of 2023 and ending at 71.21% in Q1 2026.

1) Cloudflare Sinks on AI Reform

Cloudflare (NYSE:NET) fell over 18% ahead of the opening bell as investors see the company belatedly playing catch-up on artificial intelligence (AI), with management noting it's "the biggest tailwind we've ever seen," along with quarterly results showing a 4.67% fall in gross profit margins from the prior-year period.

"Cloudflare's usage of AI has increased by more than 600% in the last three months alone": 1,100 staff are being cut, with an email sent to staff saying management "have to be intentional in how we architect our company for the agentic AI era." The job cuts represent 20% of the current workforce.
News overshadows strong set of results: Despite the fall in gross margin, revenue rose by 34% versus the same period last year, with the outlook for full-year fiscal 2026 revenue and earnings raised. The stock is outperforming the S&P 500 by 285% since the November 2022 Stock Advisor recommendation by Team Hidden Gems.

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2) SA Results From HUBS, MNST, RKLB, and NTDOY

HubSpot (NYSE:HUBS) slumped around 20% in pre-market trading as results raised some concerns over future revenue growth rates and broader valuation concerns, despite profitability for the quarter improving year over year (YOY) for the recommendation by Team HG.
Monster Beverage (NASDAQ:MNST) popped over 6% in pre-market trading thanks to the Team RB rec reporting record quarterly sales, helped out by international growth and energy drink demand.
Nintendo (OTC:NTDOY) disappointed investors as results forecasted a decline in sales for its flagship console, the Switch 2, and memory chip shortages bite at the Team Rule Breakers recommendation.
Rocket Lab (NASDAQ:RKLB) jumped over 6% ahead of the opening bell as results beat its own financial forecasts, with the Team Hidden Gems rec signing multiple new launch contracts. Fool contributing analyst Lou Whiteman said, "There is nothing in the report to suggest Rocket Lab isn't on its way toward growing into the company the market expects in the years to come."

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3) Record AI Capex Cycle Drains Tech Cash

New data from Visible Alpha shows the tech sector is facing the biggest cash strain in over a decade, as record-breaking AI capital expenditure (capex) spend weighs on free cash flow, even with higher spending in the pipeline.

Full-year free cash flow set to hit lowest level since 2014: The combined free cash flow of Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), and Meta (NASDAQ:META) is due to fall to around $4 billion in Q3, a stark drop from the $45 billion average for each quarter since the pandemic.
AI build-out seen as a once-in-a-lifetime opportunity: Amazon is expected to spend more cash than it generates this year, with other tech stocks in a similar position. Investors will need to weigh whether such spending can result in higher returns down the road.

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4) What to Watch on Friday

Enbridge (NYSE:ENB) reports before the market opens, aiming to build on the record results posted last quarter. The results should provide an update on major pending projects, including the Mainline Optimization Phases 1 and 2.
Brookfield Asset Management (NYSE:BAM) will release earnings ahead of the opening bell, with the Dividend Investor rec boasting a three-year dividend growth rate of around 15%. Last quarter showed record fee-related earnings.

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5) Your Take

Do you invest in healthcare and biotech stocks? If so, what gives you conviction -- the science, the management team, the commercial opportunity, or something else?

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