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Cloudflare on Thursday joined a growing list of tech companies \u2014 including Meta, Microsoft, and Amazon \u2014 that have reported increased revenue alongside massive layoffs, attributing both trends to their use of AI.<\/p>\n
Cloudflare, which provides internet security and performance services to millions of websites worldwide, announced it was cutting its workforce by approximately 20%, which equates to 1,100 people, it said as part of its first quarter 2026 earnings report on Thursday.<\/p>\n
\u201cWe\u2019ve never done something like this in Cloudflare\u2019s history,\u201d co-founder and CEO Matthew Prince said<\/a> Thursday on the quarterly conference call, marking the first mass layoff in the company\u2019s 16-year history. The company is cutting people from all teams and geographies except for salespeople who carry revenue quotas, CFO Thomas Seifert detailed on the call.<\/p>\n The news of the workforce cuts came as the company reported<\/a> quarterly revenues of $639.8 million, a 34% year-over-year increase and the highest single quarter in the company\u2019s history. However, this was coupled with a loss of $62.0 million compared with losing $53.2 million in the year-ago quarter.<\/p>\n That widening loss, even as revenue surged, highlights a familiar paradox in Cloudflare\u2019s story: the company is growing fast but has yet to turn a consistent profit. But the loss was a smaller percentage of revenue, and the quarter was coupled with a lot of other positive indicators. For instance, Cloudflare reported that it had over $2.5 billion in \u201cremaining performance obligations,\u201d a year-over-year growth of 34%. RPO is the favorite metric these days to indicate revenue under contract but not yet delivered.<\/p>\n Hence, Prince insisted, the 20% cuts were not to reduce expenses but were strictly because of its use of AI.<\/p>\n \u201cToday\u2019s actions are not a cost-cutting exercise or an assessment of individuals\u2019 performance; they are about Cloudflare defining how a world-class, high-growth company operates and creates value in the agentic AI era,\u201d Prince and Cloudflare co-founder and COO, Michelle Zatlyn, wrote <\/a>in a related blog post about the layoffs.<\/p>\n Techcrunch event<\/p>\n \n\t\t\t\t\t\t\t\t\tSan Francisco, CA<\/span> Prince acknowledged on the call that even though Cloudflare has been selling AI-powered products, it was at first cautious about adopting AI itself.<\/p>\n \u201cInternally, the tipping point was last November. At that point, across our teams, we began to see massive productivity gains, team members that were two, 10, even 100 times more productive than they had been before. It was like going from a manual to an electric screwdriver,\u201d he described.<\/p>\n \u201cCloudflare\u2019s usage of AI has increased by more than 600% in the last three months alone,\u201d he added.<\/p>\n Prince highlighted the internal use of AI coding, saying that virtually the entire R&D team is now using the company\u2019s own Workers platform \u2014 a tool that lets developers build and run software directly on Cloudflare\u2019s global network \u2014 including its vibe coding feature. He also noted that 100% of the code produced this way and deployed for use in Cloudflare\u2019s products is \u201cnow reviewed by autonomous AI agents.\u201d<\/p>\n But it\u2019s not just developers who are using AI internally, he said. \u201cEmployees across the company from engineering to HR to finance to marketing run thousands of AI agent sessions each day to get their work done.\u201d<\/p>\n As a result, these highly productive, AI-powered employees require fewer support staff, he argued.<\/p>\n \u201cA lot of the support people that provide support behind them, those roles aren\u2019t going to be the roles that, you know, drive companies going forward,\u201d Prince said.<\/p>\n Interestingly, Prince says that Cloudflare \u201cwill continue to hire people, and we\u2019ll continue to invest in them because the people that are embracing these tools are just so much more productive than we\u2019d ever seen before. I would guess that in 2027 we\u2019ll have more employees than we did at any point in 2026.\u201d<\/p>\n Cloudflare said it ended its first quarter before layoffs with a headcount of about 5,500.<\/p>\n The pattern Prince described \u2014 deploying AI gains as justification for workforce reductions even during a period of strong revenue growth \u2014 is fast becoming a familiar script across the tech industry. Whether it reflects true structural transformation or acts as convenient cover for cost discipline is a question that investors and employees will be wrestling with for some time to come.<\/p>\n When asked by an analyst on the call why the company needed to cut so deeply after such a good quarter, Prince said, \u201cJust because you\u2019re fit doesn\u2019t mean you can\u2019t get fitter.\u201d<\/p>\n<\/div>\n When you purchase through links in our articles, we may earn a small commission<\/a>. This doesn\u2019t affect our editorial independence.<\/em><\/p>\n
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\n\t\t\t\t\t\t\t\t\t\t\t\t\tOctober 13-15, 2026<\/span>\n\t\t\t\t\t\t\t<\/p>\n<\/p><\/div>\n<\/p><\/div>\n<\/div>\n