Cloudflare hires a Splunk sales chief to price AI agent traffic as shares trade at 169 times earnings
Cloudflare hired a Splunk-grade sales chief right after its fastest growth in four years. His real job: turning the AI agent traffic already on its network into revenue the market at 169x earnings is paying for in advance.
Richard Tangtwo-minute read
Cloudflare+0.70% — Cloudflare, up 0.70 percent today has hired a salesman for traffic nobody has priced yet. On November 5, alongside its best quarter ever, the company named Christian Smith president of revenue, formally tasked with the push to $5 billion in annual recurring revenue 1. Smith ran global go-to-market at Splunk as chief revenue officer and scaled its recurring revenue past $4 billion through a business-model change of exactly the kind Cloudflare now faces 1. The coverage noted the hire and the record quarter 2; almost no one asked what he is being hired to sell.
The traffic arrived before the price did
AI agents and crawlers already move more bits than people do. Prince said on the second-quarter call that non-human traffic passed human traffic on Cloudflare's network in May 5. Cloudflare spent this year building the control layer on top: separate permissions for search, AI training and AI agents, and an Accountable designation that Apple+0.02% — Apple, up 0.02 percent today, Google and Microsoft+0.64% — Microsoft, up 0.64 percent today now meet 6.
In the third quarter the company booked its first revenue under what it calls Act 4, its new business models for the agentic Internet, including a service that helps OpenAI$1.18T — OpenAI, private, latest valuation $1.18T crawl more efficiently 5. It never disclosed the amount 5. That is the gap in plain terms: the capability exists, the invoice does not.
Cloudflare's revenue has set a record every quarter for a year, reaching $782.5 million
Data
| Revenue | |
|---|---|
| Q4 '23 | $362.5M |
| Q1 '24 | $378.6M |
| Q2 '24 | $401M |
| Q3 '24 | $430.1M |
| Q4 '24 | $460M |
| Q1 '25 | $479.1M |
| Q2 '25 | $512.3M |
| Q3 '25 | $562M |
| Q4 '25 | $614.5M |
| Q1 '26 | $639.8M |
| Q2 '26 | $696.1M |
| Q3 '26 | $782.5M |
Why the job needs a Splunk-grade CRO
Closing that gap is enterprise selling, not plumbing. Customers management counts as large now bring in 75% of revenue, up from 73% a year earlier 4. The number bulls quote, more than 5,000 customers paying $100,000 a year, circulates on X, not in any filing 8. Meanwhile carrying the traffic is not free: GAAP gross margin fell to 71.2% from 74.0% a year earlier 3.
Gross margin has fallen 5.8 points in three years as the traffic scaled
Data
| GAAP gross margin | |
|---|---|
| Q4 '23 | 77% |
| Q1 '24 | 77.5% |
| Q2 '24 | 77.8% |
| Q3 '24 | 77.7% |
| Q4 '24 | 76.4% |
| Q1 '25 | 75.9% |
| Q2 '25 | 74.9% |
| Q3 '25 | 74% |
| Q4 '25 | 73.6% |
| Q1 '26 | 71.2% |
| Q2 '26 | 71.8% |
| Q3 '26 | 71.2% |
The market is paying ahead of the invoice
At 169 times forward earnings, after losing 12.8% in a month to November 10, shareholders are already paying for revenue Act 4 has not yet produced; analysts model $5.09 billion of 2028 revenue, above management's own $5 billion goal 75. The tells are dated: the GAAP profit management expects for the December quarter, and the first sized Act 4 dollar, both due in the February report 4.
Smith is the right hire because pricing agent traffic is real work and whoever does it deserves the reward. The bet at this price is that he does it in 2027, not that someone eventually will.
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