Cloudflare announced in May 2026 that it is cutting approximately 20% of its workforce — around 1,100 employees — attributing the reductions to productivity gains from artificial intelligence. The announcement came alongside the company’s first quarter 2026 earnings report, which showed record quarterly revenue of $639.8 million, a 34% year-over-year increase.
Co-founder and CEO Matthew Prince described the layoffs as the first mass workforce reduction in Cloudflare’s 16-year history. Speaking on the company’s quarterly earnings call, Prince said the cuts span all teams and geographies, with the exception of salespeople who carry revenue quotas. “Today’s actions are not a cost-cutting exercise or an assessment of individuals’ performance,” Prince and co-founder and president Michelle Zatlyn wrote in a blog post accompanying the announcement.
Prince pointed to an internal inflection point in November 2025, when Cloudflare began seeing significant productivity improvements across its teams. “Team members that were two, 10, even 100 times more productive than they had been before,” he said. The company’s internal AI usage has grown more than 600% in the past three months, he added. Prince noted that 100% of code produced using AI tools and deployed in Cloudflare’s products is now reviewed by autonomous AI agents, and that employees across engineering, HR, finance, and marketing run thousands of AI agent sessions daily.
Despite the record revenue, Cloudflare reported a net loss of $62.0 million for the quarter, widening from a $53.2 million loss in the same period a year earlier. The company also reported over $2.5 billion in remaining performance obligations, representing 34% year-over-year growth.
Prince said Cloudflare expects to continue hiring and projected that the company will have more employees in 2027 than at any point in 2026. The company ended Q1 2026, before the layoffs, with approximately 5,500 employees.
The pattern of citing AI efficiency as justification for workforce reductions during a period of strong revenue growth mirrors announcements from other large tech companies, including Meta, Microsoft, and Amazon. Whether such reductions reflect structural changes driven by AI or serve as cover for cost discipline may remain an open question for investors and employees alike.
Source: TechCrunch