Cloudflare cuts workforce by 20% in 'AI-first' restructuring

Cloudflare announced on May 7 it would lay off about 20% of its workforce, eliminating more than 1,100 jobs as part of a restructuring toward an 'agentic AI-first' operating model. The company, which had 5,156 full-time employees at the end of last year, cited a 600% increase in AI agent usage across departments as justification for the shift. CEO Matthew Prince and co-founder Michelle Zatlyn stated the changes were not a cost-cutting measure but a deliberate move to adapt to AI-driven workflows. The job cuts will result in second-quarter charges of $140 million to $150 million, though the company expects revenue between $664.0 million and $665.0 million, slightly below analyst estimates of $665.3 million. Adjusted profit is projected at 27 cents per share, in line with expectations. Despite the layoffs, Cloudflare’s first-quarter revenue of $639.8 million exceeded estimates of $621.9 million, with adjusted profit at 25 cents per share, above the forecasted 23 cents. Cloudflare’s AI adoption has grown rapidly, with employees across engineering, HR, finance, and marketing relying on thousands of AI agent sessions daily. The company emphasized the need to restructure operations to support this AI-driven future. Shares fell 14% in extended trading following the announcement, despite the strong quarterly performance. The layoffs mark another tech industry shift toward AI automation, as companies reshape teams and products around emerging technologies. Cloudflare’s move reflects broader industry trends, where AI integration is reshaping workforce dynamics and operational priorities.