Cloudflare admits AI eliminated 1,100 jobs despite record revenue

On Thursday, Cloudflare became the latest major tech firm to announce sweeping layoffs even as it posted record revenue, citing the transformative impact of artificial intelligence as the driving force behind the decision. The company, which provides internet security and performance services to millions of websites globally, said it would reduce its workforce by roughly 20 percent, eliminating 1,100 jobs. This marks the first mass layoff in Cloudflare’s 16-year history.

“We’ve never done something like this in Cloudflare’s history,” CEO Matthew Prince acknowledged during the first quarter 2026 earnings call. The cuts will affect teams across all regions and functions, with one notable exception: sales employees who carry revenue quotas will be spared, according to CFO Thomas Seifert.

The layoffs came alongside a quarterly revenue of $639.8 million, a 34 percent year-over-year increase and the company’s highest single quarter ever. However, net losses widened to $62.0 million from $53.2 million in the same period last year. That expanding loss, despite surging revenue, underscores a recurring challenge for Cloudflare: rapid growth without consistent profitability. Still, the loss shrank as a percentage of revenue, and other metrics were encouraging. The company reported over $2.5 billion in remaining performance obligations, also up 34 percent year-over-year , a key indicator of future revenue under contract.

Prince insisted the workforce reduction was not about cutting costs. “Today’s actions are not a cost-cutting exercise or an assessment of individuals’ performance,” he and co-founder Michelle Zatlyn wrote in a blog post. Instead, they framed the move as a necessary step to define how a world-class, high-growth company operates in the agentic AI era.

Internally, Cloudflare’s adoption of AI has accelerated dramatically. Prince noted that the tipping point came last November, when teams began seeing productivity gains of 2x, 10x, and even 100x. “It was like going from a manual to an electric screwdriver,” he said. The company’s internal AI usage has surged more than 600 percent in just the last three months. Nearly the entire R&D team now uses Cloudflare’s own Workers platform for AI-assisted coding, including a feature called vibe coding. Remarkably, 100 percent of the code produced this way and deployed in Cloudflare’s products is now reviewed by autonomous AI agents.

AI is not limited to engineering. “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,” Prince said. These highly productive, AI-augmented workers require fewer support staff, he argued. “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.”

Despite the cuts, Prince emphasized that Cloudflare will continue hiring. “We’ll continue to invest in people because those embracing these tools are so much more productive than we’d ever seen before. I would guess that in 2027 we’ll have more employees than we did at any point in 2026.” The company ended the first quarter with approximately 5,500 employees before the layoffs.

When an analyst questioned why such deep cuts were necessary after a strong quarter, Prince replied, “Just because you’re fit doesn’t mean you can’t get fitter.”

Cloudflare’s narrative , using AI-driven productivity gains to justify workforce reductions even as revenue climbs , is becoming a familiar pattern across the tech sector. Whether this reflects genuine structural change or simply provides cover for cost discipline remains an open question for investors and employees alike.