Cloudflare, Inc. (NYSE: NET) announced the release of its inaugural 2026 Cloudflare App Innovation Report, revealing a widening gap between organizations that modernize applications and those constrained by technical debt. The report found that companies prioritizing application modernization are better positioned to deploy AI securely and control costs.

According to the report, application modernization has shifted from being an internal IT objective to a core business requirement. Organizations that fail to update outdated systems are not only slowing innovation but also increasing exposure to cyber risks. Meanwhile, companies investing in modern infrastructure are accelerating growth as the broader market advances.

Cloudflare reported that legacy systems continue to limit AI innovation and increase operational costs. Organizations that delay modernization often spend most of their IT budgets on maintenance, making it harder to attract and retain skilled talent. In contrast, modernized environments allow teams to innovate faster and operate at scale.

“In order to succeed with AI, having a modern and secure foundation is non-negotiable,” said Matthew Prince, CEO and co-founder of Cloudflare. He added that organizations failing to modernize are more likely to become targets for cyberattacks and fall behind competitors.

The Cloudflare App Innovation Report revealed several key findings:

• Organizations with modernized applications are three times more likely to achieve a clear return on AI investments.
• Companies aligning security with modernization efforts are four times more likely to reach advanced AI maturity.
• A majority of organizations are actively consolidating tools to reduce complexity and eliminate shadow IT.

The report also showed that AI strategies have evolved beyond adoption to deeper integration. Most organizations surveyed have already embedded AI into existing systems, with many planning further expansion in the coming year. At the same time, delaying updates was reported as a major risk, often resulting in reactive modernization after security incidents.

The research was conducted in partnership with Qualtrics. Cloudflare surveyed 2,351 organizational leaders across NAMER, EMEA, and APAC regions between June 13 and July 21, 2025. Participants included directors, VPs, C-suite executives, and owners working in IT, security, product, or engineering roles at organizations with more than 1,000 employees.

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