New App Innovation Report shows application modernization is now critical for AI ROI, security maturity, and enterprise competitiveness
Enterprises that fail to modernize their application infrastructure are hitting a “technical glass ceiling”—one that is limiting artificial intelligence (AI) innovation while increasing exposure to cyber threats. This warning comes from Cloudflare’s inaugural 2026 App Innovation Report, which highlights a widening gap between organizations investing in modern application stacks and those weighed down by legacy systems and technical debt.
The report finds that organizations prioritizing application modernization are three times more likely to achieve measurable returns from AI investments. In contrast, companies relying on outdated infrastructure face escalating maintenance costs, slower innovation cycles, and a shrinking pool of developer talent willing to work on legacy platforms. According to Cloudflare, modernization is no longer just an IT initiative—it has become a core business imperative.
“If you aren’t modernizing your business to embrace AI and prevent the next wave of cyberattacks, you’re not standing still — you’re rapidly falling behind.”
— Matthew Prince, Co-founder and CEO, Cloudflare
A key insight from the report is that modern infrastructure is the gatekeeper for AI success. As many as 93% of business and technology leaders surveyed said updating their software environments was the single most important factor in improving AI capabilities. Without modern architectures, enterprises struggle to integrate AI into real-world workflows or scale initiatives beyond pilots.
The study also highlights a shift in enterprise AI strategy. The focus has moved from basic adoption to deep integration across application portfolios. About 91% of leading organizations have already embedded AI into existing systems, while 74% plan to increase integration efforts over the coming year, signaling a move toward AI-driven operations rather than standalone tools.
Security emerges as a major enabler of this transition. Organizations that align security initiatives with modernization efforts are four times more likely to reach advanced AI maturity, the report notes. Modern environments allow for consistent security controls and better visibility, while legacy systems often force reactive responses after breaches occur. In fact, companies lagging in modernization reported 85% lower confidence in their infrastructure.
Complexity is another growing challenge. Nearly 96% of organizations cited overly complex tech stacks as a barrier to agility. To counter this, leading enterprises are consolidating tools and eliminating redundant platforms, improving speed, security consistency, and AI effectiveness.
Cloudflare’s findings make one message clear: in an AI-driven economy, infrastructure readiness—not ambition—will determine long-term success.
