Cloudflare on Thursday joined a rising listing of tech corporations — together with Meta, Microsoft, and Amazon — which have reported elevated income alongside huge layoffs, attributing each developments to their use of AI.
Cloudflare, which supplies web safety and efficiency companies to thousands and thousands of internet sites worldwide, introduced it was slicing its workforce by roughly 20%, which equates to 1,100 individuals, it stated as a part of its first quarter 2026 earnings report on Thursday.
“We’ve by no means finished 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 slicing individuals from all groups and geographies aside 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 improve 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 proportion of income, and the quarter was coupled with lots 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 lately to point income beneath contract however not but delivered.
Therefore, Prince insisted, the 20% cuts had been to not cut back bills however had been strictly due to its use of AI.
“As we speak’s actions should not 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 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 huge productiveness beneficial properties, staff members that had been two, 10, even 100 occasions extra productive than that they had 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 interior use of AI coding, saying that just about the whole R&D staff is now utilizing the corporate’s personal Staff platform — a device that lets builders construct and run software program straight on Cloudflare’s world community — together with its vibe coding characteristic. 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 stated. “Staff throughout the corporate from engineering to HR to finance to advertising and marketing run hundreds of AI agent periods every day to get their work finished.”
In consequence, these extremely productive, AI-powered workers require fewer help workers, he argued.
“Numerous the help people who present help behind them, these roles aren’t going to be the roles that, you already know, drive corporations going ahead,” Prince stated.
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 might be 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 workers than we did at any level in 2026.”
Cloudflare stated it ended its first quarter earlier than layoffs with a headcount of about 5,500.
The sample Prince described — deploying AI beneficial properties as justification for workforce reductions even throughout a interval of sturdy income development — is quick turning into a well-known 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 buyers and workers can 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 great quarter, Prince stated, “Simply since you’re match doesn’t imply you possibly can’t get fitter.”
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