Sands Capital Management, LLC released its Q1 2026 investor letter for its “Select Growth Strategy”. A copy of the letter is available to download here. Select Growth mainly targets leading U.S. businesses, driving positive structural changes. U.S. large-cap growth stocks fell in the first quarter. Sharp dispersion driven by AI advances marked the quarter, but late in the quarter, geopolitical tensions with Iran caused a broad-based risk-off move across the market. AI continued to influence market behavior, with AI-related investments increasing dispersion and shifting capital to asset-heavy sectors benefiting from AI infrastructure demand, which faced less disruption risk. While equities struggled, corporate fundamentals remained strong. Select Growth underperformed the Russell 1000 Growth Index, returning -12.9% vs. -9.8%, due to concerns about AI disruption affecting sector and stock choices. The Strategy’s focus on higher-growth, asset-light, service businesses faced challenges as markets rotated toward more capital-intensive, lower-risk sectors. Underweights in cyclical and defensive sectors slightly hurt relative results amid the broader market shift. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Sands Capital Select Growth Strategy highlighted Cloudflare, Inc. (NYSE:NET) as a notable contributor. Cloudflare, Inc. (NYSE:NET) is a leading cloud services company that offers a range of services to businesses. On June 9, 2026, Cloudflare, Inc. (NYSE:NET) closed at $236.13 per share. One-month return of Cloudflare, Inc. (NYSE:NET) was 22.59%, and its shares gained 31.40% over the past 52 weeks. Cloudflare, Inc. (NYSE:NET) has a market capitalization of $83.46 billion.
Sands Capital Select Growth Strategy stated the following regarding Cloudflare, Inc. (NYSE:NET) in its Q1 2026 investor letter:
“Cloudflare, Inc. (NYSE:NET) is a global cloud platform that improves the security, performance, and reliability of websites and applications. Shares rose during the quarter as investors increasingly viewed the company as a beneficiary of agentic AI, given its position at a key control point for routing and securing machine-to-machine internet traffic. While we do see Cloudflare as a long-term beneficiary of AI broadly and the proliferation of agents specifically, we are more encouraged by improving enterprise sales execution reflected in recent results. Fourth-quarter 2025 revenue growth accelerated to 34 percent year over year, up from 31 percent and 28 percent in the prior two quarters. New annual contract value bookings increased 50 percent, and sales capacity expanded at the fastest pace since 2022, supporting continued momentum. New product traction is also contributing to results. Act 3 offerings, which focus on edge computing, are gaining traction, while an emerging Act 4 opportunity centered on mediating the agentic web could extend the company’s growth duration.”
Cloudflare, Inc. (NYSE:NET) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 84 hedge fund portfolios held Cloudflare, Inc. (NYSE:NET) at the end of the first quarter, up from 70 in the previous quarter. In Q1 2026, Cloudflare, Inc. (NYSE:NET) reported revenue of $639.8 million, up 34% year-over-year. While we acknowledge the risk and potential of Cloudflare, Inc. (NYSE:NET) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Cloudflare, Inc. (NYSE:NET) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Cloudflare, Inc. (NYSE:NET) and shared the list of best NYSE stocks to buy for long-term investment. In addition, please check out our hedge fund investor letters Q1 2026 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
