Brown Advisory, an investment management firm, has identified Cloudflare, Inc. (NYSE:NET) as a notable investment opportunity in its recently released investor letter for the second quarter of 2025. This letter, part of the “Brown Advisory Mid-Cap Growth Strategy,” revealed that the strategy underperformed against its benchmark, the Russell Midcap® Growth Index, which rose by 18% during the same period.
The investor letter highlighted the impact of high tariff levels announced on Liberation Day, which initially caused a spike in the Volatility Index (VIX). Nevertheless, market fear subsided as tariffs were partially rolled back and first-quarter corporate earnings demonstrated resilience. Despite its underperformance, the letter detailed the firm’s top holdings, including Cloudflare.
Cloudflare’s Performance and Growth Potential
Cloudflare has emerged as a leading provider of cloud services, delivering essential solutions to businesses worldwide. According to the investor letter, Cloudflare’s stock experienced a one-month return of 7.71% and an impressive 183.71% gain over the past 52 weeks. As of September 8, 2025, shares closed at $217.92, with a market capitalization of $75.941 billion.
Brown Advisory expressed confidence in Cloudflare’s growth trajectory, stating that the company has effectively utilized its global Content Delivery Network (CDN) to establish a robust cybersecurity business. The letter also mentioned Cloudflare’s ongoing efforts to scale its third product initiative, named ‘Workers.’ This serverless edge computing platform allows developers to run lightweight applications closer to users, enhancing performance and cost efficiency.
The firm believes there is significant growth potential in Cloudflare’s core CDN and security sectors, especially as modern application development gains momentum in rapidly expanding areas such as artificial intelligence (AI).
Investment Landscape and Hedge Fund Interest
While Cloudflare is not among the top 30 most popular stocks among hedge funds, it retains a notable presence in the investment community. At the end of the second quarter of 2025, 59 hedge fund portfolios included Cloudflare, a slight decline from 65 in the previous quarter.
In terms of revenue, Cloudflare reported a year-over-year increase of 28%, reaching $512.3 million for the second quarter. Brown Advisory acknowledged the inherent risks associated with Cloudflare as an investment but emphasized that several AI stocks may offer greater returns within a shorter time frame.
For those seeking more aggressive opportunities in the AI sector, the letter hinted at an AI stock with a potential upside of 10,000%, urging readers to explore additional reports for insights.
In summary, Brown Advisory’s analysis presents Cloudflare, Inc. as a promising investment option, buoyed by its strong market performance and future growth prospects in the evolving tech landscape. The firm encourages investors to stay informed about developments in hedge fund preferences and emerging trends in the technology sector.
