On Thursday, Cloudflare joined a growing list of tech companies, including Meta, Microsoft and Google, reporting rising revenues and mass layoffs, linking both trends to the use of artificial intelligence.
Cloudflare, which provides internet security and performance services to millions of websites worldwide, announced Thursday that it is cutting its workforce by nearly 20%, or 1,100, as part of its first-quarter 2026 earnings report.
“We’ve never done anything like this in the history of Cloudflare,” said Matthew Prince, co-founder and CEO he said Thursday at the company’s quarterly conference call, marking the first mass layoff in its 16-year history. The company is cutting people from all teams and geographies except for salespeople who carry revenue quotas, CFO Thomas Seifert detailed on the call.
The news of the workforce cuts came as the company informed quarterly revenue was $639.8 million, a 34% year-over-year increase and the highest single quarter in the company’s history. However, this combined with a loss of $62.0 million compared to a loss of $53.2 million in the prior quarter.
Even as revenue grows, this widening loss underscores a familiar paradox in Cloudflare’s story: the company is growing rapidly but has yet to turn a consistent profit. But the loss was a smaller percentage of revenue, and the quarter was mixed with many other positives. Cloudflare, for example, reported more than $2.5 billion in “remaining performance obligations,” a 34% year-over-year increase. RPO is the favorite metric these days to show revenue on a contract, but it has yet to deliver.
So, Prince insisted, the 20% cut was strictly because he was using AI, not to cut costs.
“Today’s actions aren’t about cutting costs or evaluating individual performance; they’re about Cloudflare defining how a world-class, high-growth company operates and creates value in the age of agent AI,” said Michelle Zatlin, co-founder and CEO of Prince and Cloudflare. he wrote in a related blog post about layoffs.
Techcrunch event
San Francisco, CA
|
October 13-15, 2026
Prince admitted on the call that while Cloudflare sells AI-powered products, it was initially wary of embracing AI itself.
“Internally, the tipping point was last November. That’s when we started seeing huge productivity gains on our teams, team members who were two, 10, even 100 times more productive than before. It was like going from an instruction manual to an electric screwdriver,” he said.
“Cloudflare’s use of AI has grown over 600% in the last three months alone,” he said.
Highlighting the internal use of AI coding, Prince said that virtually the entire R&D team now uses the company’s own Workforce platform — a tool that allows developers to build and run software directly on Cloudflare’s global network — with its vibe coding feature. He also noted that 100% of code produced this way and deployed for use in Cloudflare products is “now reviewed by autonomous AI agents.”
But developers aren’t the only ones using AI internally, he said. “Employees across the company, from engineering to HR to finance to marketing, spend thousands of AI agent sessions every day to get their jobs done.”
As a result, fewer support workers are required for these highly productive, AI-enabled workers, he argued.
“A lot of the support people behind them, those roles, you know, aren’t going to be the ones that drive the companies forward,” Prince said.
Interestingly, Prince says that Cloudflare “will continue to hire people and we’ll continue to invest in them because the people who adopt these tools are more productive than we’ve seen before. I would estimate that we’ll have more employees in 2027 than we did in 2026.”
Cloudflare said it ended the first quarter with about 5,500 employees before the layoffs.
The pattern Prince describes — deploying AI gains as justification for workforce reductions even during times of strong revenue growth — is fast becoming a familiar scenario in the tech industry. Whether this reflects genuine structural transformation or serves as a convenient cover for cost discipline is a question investors and workers will grapple with for some time to come.
When asked by an analyst on the call why the company needed such deep cuts after such a good quarter, Prince said, “Just because you’re fit, doesn’t mean you can’t get fitter.”
When you purchase through links in our articles, we may earn a small commission. This does not affect our editorial independence.
