Cloudflare and HubSpot both beat on Q1 earnings — but with AI threats looming, it wasn’t enough to satisfy investors
Traders continue to “sell software now, ask questions later.”
HubSpot and Cloudflare, two enterprise software companies that do completely different things — one a marketing and CRM firm, the other a cybersecurity play — are under pressure for the exact same reason this morning.
While both beat on headline earnings in Q1, both failed to successfully dispel the notion that AI is a threat to their future growth, margins, or very existence, with Cloudflare falling more than 15% in early trading Friday and HubSpot faring even worse, down 20% at the time of writing.
For Cloudflare, in Q1 2026, the company reported:
Revenue of $640 million, 2.7% ahead of consensus estimates.
Adjusted earnings per share of $0.25, 7.5% ahead of the consensus.
For HubSpot, in the first three months of its fiscal year, it managed:
Revenue of $881 million, 2% north of Wall Street estimates.
Adjusted earnings per share of $2.72, a 10% beat versus the consensus.
Strong results aside, as I noted two weeks ago:
“Whether you make dashboards, CRMs, design tools, or run an HR platform, if it’s built on code, the market thinks there’s a decent chance that at least one of the four C’s — Claude, Codex, Copilot, or Cursor — is going to blow a hole in your business model. Or, to be more accurate: someone using one of those coding tools will.”
So, any hint of AI weakness in your quarterly earnings is jumped on by the market as evidence that your future is under threat.
For Cloudflare, the company’s Q2 forecast, coupled with a massive restructuring, seems to be its undoing, with revenue for the quarter projected at around $664.5 million — that’s a hair under the consensus estimate of $666 million. At the same time, the company announced a huge set of layoffs, cutting about 1,100 jobs, or ~20% of its workforce, as the company moves to adopt AI agents and tools.
Ironically, other firms announcing a slimmed-down workforce because of AI have seen their share prices pop. However, when people think AI is going to kill your business, it seems markets won’t give you the same treatment for jumping into bed with it.
For HubSpot, it was a similar story: a Q2 revenue forecast of $897.5 million at the midpoint is about $2 million and change below consensus estimates, per Bloomberg. That’s not a lot, but even a gentle flattening of its growth trajectory seems to be enough to drive downgrades from Wall Street; analysts at Cantor Fitzgerald and William Blair both downgraded the stock to “Neutral / Market Perform” from “Overweight / Outperform,” while JPMorgan cut its price target to $250 from $325.
