Internet infrastructure giant Cloudflare announced a major restructuring last Thursday, cutting approximately 20% of its global workforce.
The layoff affects more than 1,100 employees as the company pivots toward a business model centered on automated intelligence. According to Reuters, the San Francisco-based firm ended 2025 with 5,156 full-time workers and expects to incur up to $150 million in charges related to the downsizing.
In a message to the team, Cloudflare CEO Matthew Prince and co-founder Michelle Zatlyn framed the decision as a necessary evolution rather than a financial struggle. The founders wrote:
“Today’s actions are not a cost-cutting exercise or an assessment of individuals’ performance; they are about Cloudflare defining how a world-class, high-growth company operates and creates value in the agentic AI era.”
The rise of the agentic AI era
The layoffs come at a time when Cloudflare’s internal reliance on artificial intelligence is exploding.
The company reported that its own use of AI has jumped by more than 600% in just the last three months. During an earnings call, Prince noted that the company had reached a “tipping point” last Nov, where productivity gains became impossible to ignore. As quoted by TechCrunch, Prince compared the transition to a major tool upgrade, saying:
“It was like going from a manual to an electric screwdriver.” He further explained that while the company is cutting staff, it is because AI-powered employees require less back-end support. Prince told analysts, “A lot of the support people that provide support behind them, those roles aren’t going to be the roles that, you know, drive companies going forward.”
Record revenue vs. market reality
The workforce reduction coincided with Cloudflare posting its strongest quarterly revenue to date, $639.8 million, a 34% increase over the previous year. Despite these record numbers, the company’s stock price plummeted roughly 19% in extended trading. Reuters reports that investors were likely spooked by a second-quarter revenue forecast that fell slightly below Wall Street expectations.
While the company is currently trimming its sails, the leadership suggests this isn’t the end of Cloudflare’s growth. Prince said that he expects the company will likely have more employees in 2027 than it does now. When questioned about the depth of the cuts following such a successful quarter, Prince responded, “Just because you’re fit doesn’t mean you can’t get fitter.”
Industry-wide ripple effects
Cloudflare is not alone in its AI-first pivot.
This move mirrors recent actions by other tech giants like Meta, Amazon, and Block, all of which have balanced rising revenues with significant layoffs attributed to automation. According to data from layoffs.fyi, the tech sector has seen over 102,000 job cuts in the first four months of 2026 alone, with AI cited as the primary driver for two consecutive months.
The company is offering severance packages that include full base pay through the end of 2026 for those leaving, as well as extended healthcare for US employees.
For more on how AI-driven restructuring is reshaping the tech industry, read our coverage of Jack Dorsey’s sweeping layoffs at Block and the growing push toward leaner, AI-powered teams.