Cloudflare cuts 20% of staff citing AI productivity gains

Cloudflare announced on Thursday a workforce reduction of approximately 20%, which equates to 1,100 people, from its global headcount of about 5,500 employees. The announcement came alongside the company’s first-quarter earnings report, which highlighted record financial growth despite widening losses.

The company’s financial performance for the quarter included:

• Quarterly revenue: $639.8 million, representing a 34% year-over-year increase.
• Quarterly loss: $62.0 million, compared to a loss of $53.2 million in the year-ago quarter.
• Remaining performance obligations: $2.5 billion, which represents revenue under contract but not yet delivered, marking a 34% year-over-year growth.

Co-founder and CEO Matthew Prince and co-founder and president Michelle Zatlyn stated that the layoffs are not a cost-cutting measure. Instead, they framed the decision as a strategic shift to align with technological advancements. “Today’s actions are not a cost-cutting exercise or an assessment of individuals’ performance; they are about Cloudflare defining how a world-class, high-growth company operates and creates value in the agentic AI era,” the co-founders wrote, referring to AI systems capable of performing tasks autonomously.

Prince noted that the internal tipping point occurred last November, when the company began seeing massive productivity gains. Cloudflare’s internal usage of AI has increased by more than 600% in the last three months. Virtually the entire research and development team is now using Workers—Cloudflare’s platform for developers to build and run software on its network—including its vibe coding feature, which is a feature within the Workers platform. Prince added that 100% of the code produced this way and deployed for use in Cloudflare’s products is now reviewed by autonomous AI agents, reducing the need for support staff.

The workforce reduction is the first mass layoff in the company’s history. CFO Thomas Seifert detailed that the cuts affect all teams and geographies worldwide, except for salespeople who carry revenue quotas. When asked by an analyst why the company needed to cut staff after a record quarter, Prince responded that being fit does not mean a company cannot get fitter.

Despite the current cuts, Prince indicated that he would guess the company will continue to hire people in 2027, as the company continues to invest in workers who embrace these highly productive tools.

Why it matters

Cloudflare’s decision to cut 20% of its workforce while reporting record revenue highlights a growing trend of tech companies attributing layoffs to AI-driven productivity gains rather than financial distress.