Cloudflare: building the roads, bridges and tolls of the internet

Image generated by AI

Investors should carefully consider the objectives, risks, charges and expenses of the fund before investing. This information and other information about the fund can be found in the prospectus and summary prospectus. For a prospectus or summary prospectus please visit our website at https://usmutualfund.bailliegifford.com. Please carefully read the fund’s prospectus and related documents before investing. Securities are offered through Baillie Gifford Funds Services LLC, an affiliate of Baillie Gifford Overseas Limited and a member of FINRA.

“We make anything connected to the internet – and when I say anything, I really mean anything – faster, safer and more reliable. We help build the backbone and infrastructure: the roads and bridges of the internet that make everything work. We kind of take these for granted in cities, and when they don’t work, it’s frustrating. We do this in the digital space.” – Matthew Prince, CEO

We first met Cloudflare in 2015, when it was still private. Its mission was already clear: to build a better internet. At the time, most websites relied on single servers that could quickly overload under heavy traffic.

Cloudflare was pioneering a different approach, distributing content across many locations to deliver it closer to users, faster and more reliably. Our note from that meeting ended simply: “We should keep an eye out.”

We did. Following Cloudflare’s initial public offering in 2019, LTGG initiated a holding in 2020. Our thesis then was straightforward: if Cloudflare could turn the internet’s basic connections into a network where applications also run, providing a distributed alternative to the centralised servers of the big cloud platforms, the potential upside could be dramatic.

Building a global network

Even through the lens of LTGG’s natural optimism, that now looks conservative. In the five years since, Cloudflare has grown into one of the most ambitious infrastructure companies in the digital economy.

Its network now spans 330+ cities in 125 countries, reaching 95 per cent of internet users within around 50 milliseconds. That proximity matters. Like roads built closer to homes and businesses, lower latency allows faster load times, smoother applications, and a more seamless digital experience.

Scale alone, however, does not ensure outlier potential. For LTGG, one of the most powerful routes to success is adaptability: the ability to unlock entirely new acts of growth. Few companies embody this better than Cloudflare.

Acts I-III: Defend. Deliver. Develop. 

Its first act was about security. Its reverse proxy blocked malicious traffic and denial-of-service attacks, giving even the smallest start-ups access to Fortune 500-grade resilience.

Next came secure connectivity. With Zero Trust services, Cloudflare replaces costly hardware with cloud-native security. What once required routers, private lines, and on-premise boxes can now be accessed securely from anywhere.

Its third act empowers developers with Cloudflare Workers: a serverless platform that allows applications to run directly on its global network. Unlike the hyperscalers’ centralised data centres (such as Amazon Web Services and Google Cloud Platform), Cloudflare’s distributed architecture offers speed, cost efficiency and compliance advantages.

These benefits are especially evident in AI inference – the process of running AI models to generate answers or actions – where responsiveness and local data handling are critical. These acts have broadened Cloudflare’s scope, deepened its moat, and set the stage for what comes next.

Act IV: reshaping the internet economics in the AI era

If Act III is about powering developers, Act IV is about shaping the rules of the digital economy.

Artificial intelligence is already unsettling many traditional SaaS business models (where companies charge recurring subscription fees for software delivered over the internet). If AI can automate tasks or compress entire workflows, why continue paying recurring fees for narrow tools? Incumbents risk seeing their moats eroded.

For Cloudflare, however, the story could be different.

Every AI system depends on fast, secure and widely distributed networks to move data and run inference at scale. Rather than being undermined, Cloudflare’s role as infrastructure becomes more essential.

AI also upends the long-standing bargain between websites and search engines. In the past, content could be ‘crawled’ – automatically scanned and indexed by search engines – in exchange for referral traffic that sent users back to the site. Generative AI, however, goes further. It ‘scrapes’ content, copying it in huge volumes to feed its models, but rarely returns visitors to the source.

Cloudflare’s AI Crawl Control seeks to reset this balance.

Sitting in front of roughly a quarter of the world’s websites, Cloudflare can enforce terms that require AI companies to pay for access. A recently announced partnership with Coinbase adds the possibility of micropayments in stablecoins: effectively tolls for the digital era.

In our recent conversation with Matthew Prince, he described the more interesting opportunity as helping “make the pool smart.” In his view, Cloudflare could allow model makers to assess content quality by asking: “How authoritative is this?” and “Does it fill a hole in my knowledge cheese, or is it more cheese?”

This could evolve into value scores for content, allowing AI models to pay more for material that truly adds knowledge. Looking ahead, Prince also sees these rails extending beyond crawlers to AI agents acting on our behalf, from booking flights to making purchases, with Cloudflare in the middle to manage and monetise those transactions.

For LTGG, the implications extend well beyond Cloudflare. If scraping shifts from being free to something AI platforms must pay for, whole industries may need to rethink their business models.

Advertising could give way to direct compensation from AI platforms, and content might evolve from click-driven headlines to material designed for machine learning. At the same time, Cloudflare’s global network could help decentralise AI, enabling new classes of applications from a much broader base of developers.

For us, these developments raise important considerations about how value is created and captured in the intelligence era and how this could affect companies in our investable universe – questions we continue to explore within the LTGG team.

Why this matters

Despite some trims to the position this year, the outlier potential remains significant. Cloudflare has already moved from protecting websites to securing corporate networks to offering a global developer platform.

The next step could be transformational: becoming a leading AI inference platform while capturing payments for AI scraping. To give a sense of scale, Google processes 3.2 trillion daily searches. If agentic AI multiplies that volume and costs fall sharply, Cloudflare capturing just 10 per cent of the traffic could equate to around $10bn of revenue.

And unlike human search, AI workloads can run continuously. With a quarter of the world’s websites already behind it, even tiny tolls on trillions of automated queries could create a new economic layer for the internet.

If successful, Cloudflare will not just enable the AI economy, it will help govern it. By building the roads and bridges of the internet and setting the tolls for their use, it is positioning itself as both builder and gatekeeper.

Risk factors

This content contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research and Baillie Gifford and its staff may have dealt in the investments concerned.

As with all mutual funds, the value of an investment in the fund could decline, so you could lose money.

The most significant risks of an investment in the Baillie Gifford Long Term Global Growth Fund are: Investment Style Risk, Growth Stock Risk, Long-Term Investment Strategy Risk, Non-Diversification Risk and Non-U.S. Investment Risk. The Fund is managed on a bottom up basis and stock selection is likely to be the main driver of investment returns. Returns are unlikely to track the movements of the benchmark. The prices of growth stocks can be based largely on expectations of future earnings and can decline significantly in reaction to negative news. The Fund is managed on a long-term outlook, meaning that the Fund managers look for investments that they think will make returns over a number of years, rather than over shorter time periods. The Fund may have a smaller number of holdings with larger positions in each relative to other mutual funds. Non-U.S. securities are subject to additional risks, including less liquidity, increased volatility, less transparency, withholding or other taxes and increased vulnerability to adverse changes in local and global economic conditions. There can be less regulation and possible fluctuation in value due to adverse political conditions. Other Fund risks include: Asia Risk, China Risk, Conflicts of Interest Risk, Currency Risk, Developed Markets Risk, Emerging Markets Risk, Equity Securities Risk, Environmental, Social and Governance Risk, Focused Investment Risk, Government and Regulatory Risk, Information Technology Risk, Initial Public Offering Risk, Large-Capitalization Securities Risk, Liquidity Risk, Market Disruption and Geopolitical Risk, Market Risk, Service Provider Risk, Settlement Risk, Small-and Medium-Capitalization Securities Risk, and Valuation Risk.

For more information about these and other risks of an investment in the fund, see “Additional Information about Principal Strategies and Risks” in the prospectus. The Baillie Gifford Long Term Global Growth Fund seeks to provide long-term capital appreciation. There can be no assurance, however, that the fund will achieve its investment objective.

The fund is distributed by Baillie Gifford Funds Services LLC. Baillie Gifford Funds Services LLC is registered as a broker-dealer with the SEC, a member of FINRA and is an affiliate of Baillie Gifford Overseas Limited.

All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.

The images used in this article are for illustrative purposes only.

Top Ten Holdings

As at September 30, 2025

It should not be assumed that recommendations/transactions made in the future will be profitable or will equal performance of the securities mentioned. A full list of holdings is available on request. The composition of the fund's holdings is subject to change. Percentages are based on securities at market value.

178401 10058518