Cloudflare on Thursday joined a rising listing of tech corporations — together with Meta, Microsoft, and Amazon — which have reported elevated income alongside large layoffs, attributing each developments to their use of AI.
Cloudflare, which supplies web safety and efficiency companies to tens of millions of internet sites worldwide, introduced it was chopping its workforce by roughly 20%, which equates to 1,100 individuals, it mentioned as a part of its first quarter 2026 earnings report on Thursday.
“We’ve by no means achieved one thing like this in Cloudflare’s historical past,” co-founder and CEO Matthew Prince said Thursday on the quarterly convention name, marking the primary mass layoff within the firm’s 16-year historical past. The corporate is chopping individuals 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 very best single quarter within the firm’s historical past. Nevertheless, this was coupled with a lack of $62.0 million in contrast with dropping $53.2 million within the year-ago quarter.
That widening loss, whilst income surged, highlights a well-known 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. For example, 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 nowadays to point income underneath contract however not but delivered.
Therefore, Prince insisted, the 20% cuts have been to not cut back bills however have been strictly due to its use of AI.
“At this time’s actions aren’t 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 COO, Michelle Zatlyn, wrote in a associated weblog submit concerning 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 large productiveness positive aspects, crew members that have been two, 10, even 100 instances extra productive than they’d been earlier than. It was like going from a guide 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 inner use of AI coding, saying that nearly the whole R&D crew is now utilizing the corporate’s personal Employees platform — a software 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.”
However it’s not simply builders who’re utilizing AI internally, he mentioned. “Workers throughout the corporate from engineering to HR to finance to advertising run 1000’s of AI agent periods every day to get their work achieved.”
Consequently, these extremely productive, AI-powered workers require fewer help workers, he argued.
“Loads of the help folks that present help behind them, these roles aren’t going to be the roles that, , drive corporations going ahead,” Prince mentioned.
Apparently, Prince says that Cloudflare “will proceed to rent individuals, and we’ll proceed to put money into them as a result of the individuals which can be embracing these instruments are simply a lot extra productive than we’d ever seen earlier than. I might guess that in 2027 we’ll have extra workers 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 robust income development — is quick turning into a well-known script throughout the tech trade. Whether or not it displays true structural transformation or acts as handy cowl for price self-discipline is a query that buyers and workers shall be wrestling with for a while to come back.
When requested by an analyst on the decision why the corporate wanted to chop so deeply after such a superb quarter, Prince mentioned, “Simply since you’re match doesn’t imply you may’t get fitter.”
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