California tech company Cloudflare to lay off more than 1,000 workers, cites AI

Cloudflare, a San Francisco-based web performance and cybersecurity company, will lay off 1,100 employees, accounting for 20% of its workforce. The decision comes as the company accelerates its use of AI tools, with AI agent sessions increasing over 600% in the past three months. CEO Matthew Prince and COO Michelle Zatlyn stated in an internal email that AI has fundamentally changed how Cloudflare operates, positioning the company as its own ‘most demanding customer’ for AI-driven solutions. The layoffs affect roles across engineering, HR, finance, and marketing, as employees now rely on AI agents for daily tasks. Cloudflare aims to avoid further major cuts by consolidating restructuring efforts now, citing prolonged uncertainty and operational delays as risks of incremental layoffs. Severance and restructuring costs are estimated between $140 million and $150 million for 2026. Cloudflare’s first-quarter earnings showed a 34% year-over-year revenue jump to $639.8 million, though it posted a net loss of $22.9 million. However, the company’s second-quarter revenue forecast of $664 million to $665 million fell short of Wall Street’s $666 million expectation, contributing to an 18% stock decline in after-hours trading. The layoffs were announced alongside these earnings, reflecting a strategic pivot amid AI-driven efficiency gains. As of December 2025, Cloudflare employed 5,156 people globally, with offices in Asia, Europe, and the Middle East. The company emphasized its commitment to preparing for an ‘agentic AI era,’ where AI tools will play a central role in operations. The mass layoffs align with broader tech industry trends, as companies like Coinbase and PayPal have also announced significant workforce reductions in recent months.