Cloudflare says AI made 1,100 jobs out of date, at the same time as income hit a report excessive

Cloudflare on Thursday joined a rising listing of tech firms — together with Meta, Microsoft, and Amazon — which have reported elevated income alongside large layoffs, attributing each tendencies to their use of AI.

Cloudflare, which offers web safety and efficiency companies to thousands and thousands 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 carried out 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 chopping 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 best single quarter within the firm’s historical past. Nevertheless, 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, at the same time as 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 quite a lot of different optimistic indicators. For example, Cloudflare reported that it had over $2.5 billion in “remaining efficiency obligations,” a year-over-year progress 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.

“Right this moment’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 submit concerning the layoffs.

Prince acknowledged on the decision that though 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 beneficial properties, workforce members that have been two, 10, even 100 instances 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 nearly the complete R&D workforce is now utilizing the corporate’s personal Employees platform — a instrument that lets builders construct and run software program immediately 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 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 carried out.”

Because of this, these extremely productive, AI-powered staff require fewer help workers, he argued.

“Quite a lot of the help those that present help behind them, these roles aren’t going to be the roles that, you understand, drive firms going ahead,” Prince mentioned.

Apparently, Prince says that Cloudflare “will proceed to rent individuals, and we’ll proceed to spend money on 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 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 beneficial properties as justification for workforce reductions even throughout a interval of sturdy income progress — is quick turning 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 will probably 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 a very good quarter, Prince mentioned, “Simply since you’re match doesn’t imply you’ll be able to’t get fitter.”