Cloudflare cuts 1,100 jobs, cites AI productivity

Cloudflare cut roughly 1,100 positions, about 20% of its workforce, after reporting its strongest quarter on record. Company executives announced the reductions were the result of gains in internal AI-driven productivity rather than a traditional cost-cutting program.

Chief Executive Matthew Prince and co-founder Michelle Zatlyn wrote that internal AI use rose 600% over the prior three months and that teams reported productivity improvements “two, 10, even 100 times.” They described the changes as part of preparing the company for what they called the “agentic AI era.”

Cloudflare reported first-quarter revenue of $639.8 million, up 34% year over year. Net loss widened to $62 million from $53.2 million a year earlier. Adjusted gross margins fell to 72.8% from 77.1% the prior year. Remaining performance obligations, revenue under contract not yet delivered, totaled $2.5 billion, up 34% year over year.

The company forecast second-quarter revenue growth of about 30%, below the 33.5% pace it posted for the quarter. The stock fell more than 15% in premarket trading. Several brokerages raised price targets after the report; the median target moved to $243.

Prince described changes to engineering workflows, saying nearly the entire R&D team now codes on Cloudflare’s Workers platform and uses a feature called “vibe coding.” He said every line of code deployed through that pipeline is reviewed by autonomous AI agents. “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,” Prince said.

CFO Thomas Seifert noted the cuts affected every team and geography except quota-carrying sales staff. The company had about 5,500 employees before the reductions. Prince expects headcount to be higher in 2027 than at any point in 2026. Seifert said, “We’ve never done something like this in Cloudflare’s history.” Prince told analysts, “Just because you’re fit doesn’t mean you can’t get fitter.”

Cloudflare joins other large technology firms that have cited AI-driven productivity when announcing layoffs. OpenAI CEO Sam Altman has warned there can be “AI washing,” where companies attribute workforce reductions to AI when other factors may be involved.

Executives added the layoffs were not a reflection of individual performance and characterized the changes as a redefinition of which roles are needed given the productivity gains from internal AI tools.