Cloudflare on Thursday joined a rising record of tech corporations — together with Meta, Microsoft, and Amazon — that experience reported greater earnings along large layoffs, attributing each tendencies to their use of AI.
Cloudflare, which supplies web safety and function products and services to thousands and thousands of web pages international, introduced it was once reducing its personnel by means of roughly 20%, which equates to one,100 other people, it mentioned as a part of its first quarter 2026 profits document on Thursday.
“We’ve by no means executed one thing like this in Cloudflare’s historical past,” co-founder and CEO Matthew Prince mentioned Thursday at the quarterly convention name, marking the primary mass layoff within the corporate’s 16-year historical past. The corporate is reducing other people from all groups and geographies with the exception of for salespeople who lift earnings quotas, CFO Thomas Seifert detailed at the name.
The inside track of the personnel cuts got here as the corporate reported quarterly revenues of $639.8 million, a 34% year-over-year build up and the perfect unmarried quarter within the corporate’s historical past. Then again, this was once coupled with a lack of $62.0 million in comparison with shedding $53.2 million within the year-ago quarter.
That widening loss, at the same time as earnings surged, highlights a well-recognized paradox in Cloudflare’s tale: the corporate is rising speedy however has but to show a constant benefit. However the loss was once a smaller proportion of earnings, and the quarter was once coupled with numerous different certain signs. For example, Cloudflare reported that it had over $2.5 billion in “final efficiency duties,” a year-over-year progress of 34%. RPO is the favourite metric at the moment to signify earnings underneath contract however no longer but delivered.
Therefore, Prince insisted, the 20% cuts have been to not scale back bills however have been strictly on account of its use of AI.
“These days’s movements don’t seem to be a cost-cutting workout or an review of people’ efficiency; they’re about Cloudflare defining how a world-class, high-growth corporate operates and creates worth within the agentic AI technology,” Prince and Cloudflare co-founder and COO, Michelle Zatlyn, wrote in a similar weblog submit in regards to the layoffs.
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Prince said at the name that even supposing Cloudflare has been promoting AI-powered merchandise, it was once to start with wary about adopting AI itself.
“Internally, the tipping level was once ultimate November. At that time, throughout our groups, we started to peer large productiveness positive factors, workforce participants that have been two, 10, even 100 instances extra productive than they’d been sooner than. It was once like going from a handbook to an electrical screwdriver,” he described.
“Cloudflare’s utilization of AI has greater by means of greater than 600% within the ultimate 3 months on my own,” he added.
Prince highlighted the inner use of AI coding, announcing that almost all the R&D workforce is now the usage of the corporate’s personal Employees platform — a device that shall we builders construct and run instrument at once on Cloudflare’s international community — together with its vibe coding function. He additionally famous that 100% of the code produced this fashion and deployed to be used in Cloudflare’s merchandise is “now reviewed by means of self sustaining AI brokers.”
Nevertheless it’s no longer simply builders who’re the usage of AI internally, he mentioned. “Staff around the corporate from engineering to HR to finance to advertising run 1000’s of AI agent periods every day to get their paintings executed.”
Consequently, those extremely productive, AI-powered workers require fewer reinforce personnel, he argued.
“Numerous the reinforce other people that supply reinforce at the back of them, the ones roles aren’t going to be the jobs that, you understand, force corporations going ahead,” Prince mentioned.
Curiously, Prince says that Cloudflare “will proceed to rent other people, and we’ll proceed to put money into them for the reason that other people which can be embracing those equipment are simply so a lot more productive than we’d ever noticed sooner than. I’d bet that during 2027 we’ll have extra workers than we did at any level in 2026.”
Cloudflare mentioned it ended its first quarter sooner than layoffs with a headcount of about 5,500.
The development Prince described — deploying AI positive factors as justification for personnel discounts even all over a duration of sturdy earnings progress — is speedy changing into a well-recognized script around the tech business. Whether or not it displays true structural transformation or acts as handy duvet for charge self-discipline is a query that traders and workers might be wrestling with for a while to return.
When requested by means of an analyst at the name why the corporate had to lower so deeply after the sort of excellent quarter, Prince mentioned, “Simply since you’re have compatibility doesn’t imply you’ll be able to’t get healthier.”
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