Cloudflare on Thursday joined a rising checklist of tech corporations — together with Meta, Microsoft, and Amazon — which have reported elevated income alongside huge layoffs, attributing each tendencies to their use of AI.
Cloudflare, which offers web safety and efficiency providers to hundreds of thousands of internet sites worldwide, introduced it was slicing its workforce by roughly 20%, which equates to 1,100 folks, it mentioned as a part of its first quarter 2026 earnings report on Thursday.
“We’ve by no means executed one thing like this in Cloudflare’s historical past,” co-founder and CEO Matthew Prince mentioned Thursday on the quarterly convention name, marking the primary mass layoff within the firm’s 16-year historical past. The corporate is slicing folks from all groups and geographies apart from salespeople who carry income quotas, CFO Thomas Seifert detailed on the decision.
The information of the workforce cuts got here as the corporate reported quarterly revenues of $639.8 million, a 34% year-over-year enhance and the best single quarter within the firm’s historical past. Nonetheless, this was coupled with a lack of $62.0 million in contrast with shedding $53.2 million within the year-ago quarter.
That widening loss, whilst income surged, highlights a well-recognized paradox in Cloudflare’s story: The corporate is rising quick however has but to show a constant revenue. However the loss was a smaller share of income, and the quarter was coupled with plenty of different optimistic indicators. As an illustration, Cloudflare reported that it had over $2.5 billion in “remaining efficiency obligations,” a year-over-year development of 34%. RPO is the favourite metric today to point income beneath contract however not but delivered.
Therefore, Prince insisted, the 20% cuts had been to not scale back bills however had been strictly due to its use of AI.
“Immediately’s actions will not be a cost-cutting train or an evaluation of people’ efficiency; they’re about Cloudflare defining how a world-class, high-growth firm operates and creates worth within the agentic AI period,” Prince and Cloudflare co-founder and president, Michelle Zatlyn, wrote in a associated weblog put up in regards to the layoffs.
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Prince acknowledged on the decision that although Cloudflare has been promoting AI-powered merchandise, it was at first cautious about adopting AI itself.
“Internally, the tipping level was final November. At that time, throughout our groups, we started to see huge productiveness positive aspects, crew members that had been two, 10, even 100 instances extra productive than they’d been earlier than. It was like going from a handbook to an electrical screwdriver,” he described.
“Cloudflare’s utilization of AI has elevated by greater than 600% within the final three months alone,” he added.
Prince highlighted the interior use of AI coding, saying that nearly your complete R&D crew is now utilizing the corporate’s personal Employees platform — a instrument that lets builders construct and run software program instantly on Cloudflare’s international community — together with its vibe coding function. He additionally famous that 100% of the code produced this fashion and deployed to be used in Cloudflare’s merchandise is “now reviewed by autonomous AI brokers.”
Nevertheless it’s not simply builders who’re utilizing AI internally, he mentioned. “Workers throughout the corporate from engineering to HR to finance to advertising and marketing run hundreds of AI agent classes every day to get their work executed.”
Because of this, these extremely productive, AI-powered staff require fewer help employees, he argued.
“Quite a lot of the help people who present help behind them, these roles aren’t going to be the roles that, you recognize, drive corporations going ahead,” Prince mentioned.
Apparently, Prince says that Cloudflare “will proceed to rent folks, and we’ll proceed to put money into them as a result of the folks which are embracing these instruments are simply a lot extra productive than we’d ever seen earlier than. I’d guess that in 2027 we’ll have extra staff than we did at any level in 2026.”
Cloudflare mentioned it ended its first quarter earlier than layoffs with a headcount of about 5,500.
The sample Prince described — deploying AI positive aspects as justification for workforce reductions even throughout a interval of sturdy income development — is quick changing into a well-recognized script throughout the tech business. Whether or not it displays true structural transformation or acts as handy cowl for price self-discipline is a query that traders and staff can be wrestling with for a while to return.
When requested by an analyst on the decision why the corporate wanted to chop so deeply after such an excellent quarter, Prince mentioned, “Simply since you’re match doesn’t imply you possibly can’t get fitter.”
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