New Cloudflare Report Warns of a ‘Technical Glass Ceiling’ Stifling AI Growth and Weakening Cybersecurity

New research shows that organizations modernizing apps are 3x more likely to see AI payoffs, while those clinging to legacy systems face rising security risks and developer talent shortages

SAN FRANCISCO--(BUSINESS WIRE)--Cloudflare, Inc. (NYSE: NET), the leading connectivity cloud company, today published its inaugural 2026 App Innovation Report. Findings from the report reveal a stark divide, with companies that prioritize application modernization—i.e., updating tech stacks to move away from outdated systems—able to successfully use AI and stay secure, while those stuck with technical debt are falling behind and facing rising costs. The report ultimately underscores that application modernization is no longer just an IT goal, it’s the key to how organizations across every industry maintain a competitive edge.

The urgency for application modernization is clear: If an organization fails to modernize, they do not just stay in the same place, they move backward as the rest of the market accelerates. Organizations that continue to cling to legacy systems face a barrier that stifles AI innovation and leaves them more vulnerable to cyberattacks. While leaders invest in growth, lagging organizations are trapped in a cycle of high maintenance costs and talent drain—spending the majority of their IT budgets on keeping the lights on while competitors pull ahead.

“In order to succeed with AI, having a modern and secure foundation is non-negotiable. This report made clear that organizations who prioritize modernization are able to innovate at speed and scale, while those who don’t are likely to become a threat actor’s next target,” said Matthew Prince, CEO and co-founder of Cloudflare. “If you aren't modernizing your business to embrace AI and prevent the next wave of cyberattacks, you aren't just standing still, you’re rapidly falling behind. The winners of this era of the Internet will ultimately be defined by their infrastructure.”

Key highlights from Cloudflare’s 2026 App Innovation Report:

• Up-to-date infrastructure is the gatekeeper for AI success: Companies that modernize their apps are 3x more likely to see a clear ROI on AI. In fact, 93% of leaders say updating their software was the single most important factor in boosting their AI capabilities.
• Mindsets around AI have shifted from adoption to integration: The race has moved beyond simply using AI, to now focusing on deepening integrations. 91% of leading organizations have already integrated AI into their existing portfolios, with 74% planning to double down on integration in the coming year.
• Security is a growth multiplier: Security is not just a shield; it is a multiplier. Companies that align their security with their modernization efforts are 4x more likely to reach advanced AI maturity.
• There is a high cost of inaction: Delaying updates is a massive risk. Organizations lagging in modernization report 85% less confidence in their infrastructure and often only modernize "reactively" after a security breach occurs.
• Having too many tech tools is a universal concern: Simplicity is winning. While 96% of companies struggle with complex tech stacks, leaders are moving aggressively to consolidate—85% are actively cutting redundant tools and "shadow IT" to move faster.

Methodology

In partnership with Qualtrics, Cloudflare interviewed organization leaders who live in target countries across NAMER, EMEA, and APAC regions. Cloudflare limited the scope of interviews to those who are currently a director, VP, C-suite executive, or owner of their organization; who work full-time in target roles within IT, security, product, or engineering; and who have at least some influence on IT infrastructure or vendor decisions. Those who work for organizations with fewer than 1,000 employees did not qualify for this research. Responses were completed by 2,351 organizational leaders, during the survey period, fielded from June 13 to July 21, 2025.

To learn more about the 2026 Cloudflare App Innovation Report please check out the resources below:

• 2026 Cloudflare App Innovation Report
• Cloudflare TV series

About Cloudflare

Cloudflare, Inc. (NYSE: NET) is the leading connectivity cloud company. It empowers organizations to make their employees, applications and networks faster and more secure everywhere, while reducing complexity and cost. Cloudflare’s connectivity cloud delivers the most full-featured, unified platform of cloud-native products and developer tools, so any organization can gain the control they need to work, develop, and accelerate their business.

Powered by one of the world’s largest and most interconnected networks, Cloudflare blocks billions of threats online for its customers every day. It is trusted by millions of organizations – from the largest brands to entrepreneurs and small businesses to nonprofits, humanitarian groups, and governments across the globe.

Learn more about Cloudflare’s connectivity cloud at cloudflare.com/connectivity-cloud. Learn more about the latest Internet trends and insights at https://radar.cloudflare.com.

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Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “explore,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of these words, or other similar terms or expressions that concern Cloudflare’s expectations, strategy, plans, or intentions. However, not all forward-looking statements contain these identifying words. Forward-looking statements expressed or implied in this press release include, but are not limited to, statements regarding the impact of modernizing applications on the future cybersecurity, financial results, competitiveness, talent retention, and business success of companies as described in the 2026 Application Innovation Report, Cloudflare’s products, initiatives, and results as reflected in the 2026 Application Innovation Report, Cloudflare’s global network, and Cloudflare’s products and technology, Cloudflare’s technological development, future operations, growth, initiatives, or strategies, and comments made by Cloudflare’s CEO and others. Actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in Cloudflare’s filings with the Securities and Exchange Commission (SEC), including Cloudflare’s Quarterly Report on Form 10-Q filed on October 30, 2025, as well as other filings that Cloudflare may make from time to time with the SEC.

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