Cloudflare announced Thursday that it will reduce its workforce by approximately 20%, or about 1,100 employees, as the company said artificial intelligence tools are significantly increasing employee productivity across its operations.
The layoffs were disclosed alongside Cloudflare’s first-quarter 2026 earnings results, which showed record quarterly revenue growth despite continuing net losses.
“This is the first mass layoff in Cloudflare’s 16-year history,” Matthew Prince said during the company’s earnings call.
Prince said the cuts affected employees across nearly all teams and geographic regions.
Thomas Seifert added that sales employees carrying revenue quotas were excluded from the reductions.
The layoffs place Cloudflare among a growing group of technology companies, including Meta Platforms, Microsoft, and Amazon, that have linked workforce reductions to expanded use of AI tools while reporting strong revenue growth.
Revenue Hits Record High Despite Losses
Cloudflare reported first-quarter revenue of $639.8 million, representing a 34% increase compared with the same period last year.
The quarter marked the highest revenue total in the company’s history.
At the same time, the company posted a net loss of $62 million, compared with a $53.2 million loss during the previous year’s quarter.
Cloudflare also reported more than $2.5 billion in remaining performance obligations, a metric measuring contracted future revenue that has not yet been recognized.
That figure also increased 34% year over year.
Prince said the layoffs were not designed primarily as a cost-cutting measure.
“Today’s actions are not a cost-cutting exercise or an assessment of individuals’ performance,” Prince and Michelle Zatlyn wrote in a related company blog post.
The executives described the changes as part of adapting the company for what they called the “agentic AI era.”
Company Says AI Productivity Increased Rapidly
Prince said Cloudflare initially approached internal AI adoption cautiously despite selling AI-related products externally.
According to him, the company’s internal use of AI accelerated significantly beginning in November.
“At that point, across our teams, we began to see massive productivity gains,” Prince said during the earnings call.
He described employees becoming “two, 10, even 100 times more productive than they had been before.”
Prince compared the transition to moving “from a manual to an electric screwdriver.”
The CEO also said Cloudflare’s AI usage increased more than 600% during the past three months.
He highlighted internal software development practices, saying nearly the entire research and development organization now uses Cloudflare’s own Workers platform and its “vibe coding” tools.
Prince added that all code generated through those workflows and deployed into Cloudflare products is reviewed by autonomous AI agents.
AI Use Expanded Beyond Engineering Teams
According to Prince, AI systems are now widely used across departments including engineering, finance, human resources, and marketing.
“Employees across the company from engineering to HR to finance to marketing run thousands of AI agent sessions each day to get their work done,” he said.
Prince argued that AI-enhanced productivity reduces the need for certain support roles.
“A lot of the support people that provide support behind them, those roles aren’t going to be the roles that drive companies going forward,” he said.
Despite the layoffs, Prince said Cloudflare expects to continue hiring in the future.
He predicted the company could have more employees in 2027 than at any point during 2026.
Cloudflare said it employed approximately 5,500 people before the workforce reductions.
When asked during the earnings call why the company needed deep layoffs after posting strong financial results, Prince responded: “Just because you’re fit doesn’t mean you can’t get fitter.”
Featured image credits: Wikimedia Commons
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