Cloudflare says AI made 1,100 jobs out of date, whilst income hit a file excessive

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 tendencies to their use of AI.

Cloudflare, which offers web safety and efficiency providers to tens of millions of internet sites worldwide, introduced it was slicing its workforce by roughly 20%, which equates to 1,100 folks, it mentioned as a part of its first quarter 2026 earnings report on Thursday.

“We’ve by no means performed 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 folks 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 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-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 proportion of income, and the quarter was coupled with numerous different optimistic indicators. As an 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 today to point income underneath contract however not but delivered.

Therefore, Prince insisted, the 20% cuts have been to not scale back bills however have been strictly due to its use of AI.

“Right now’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 in regards to the layoffs.

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 features, crew members that have been two, 10, even 100 occasions extra productive than they’d been earlier than. It was like going from a handbook 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 just about your complete R&D crew is now utilizing the corporate’s personal Staff platform — a instrument that lets builders construct and run software program straight on Cloudflare’s international community — together with its vibe coding characteristic. He additionally famous that 100% of the code produced this manner 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. “Staff throughout the corporate from engineering to HR to finance to advertising run hundreds of AI agent periods every day to get their work performed.”

Consequently, these extremely productive, AI-powered staff require fewer assist workers, he argued.

“Loads of the assist folks that present assist behind them, these roles aren’t going to be the roles that, you understand, drive corporations going ahead,” Prince mentioned.

Apparently, Prince says that Cloudflare “will proceed to rent folks, and we’ll proceed to put money into them as a result of the folks which are 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 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 features as justification for workforce reductions even throughout a interval of robust income development — 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 value self-discipline is a query that buyers 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 great quarter, Prince mentioned, “Simply since you’re match doesn’t imply you may’t get fitter.”