Cloudflare to lay off 1,100 employees as internal AI usage jumps 600%
Cloudflare is cutting over 1,100 jobs as it restructures around an “agentic AI-first” operating model despite strong quarterly earnings.
Cloudflare is cutting more than 1,100 jobs globally as the company restructures around what it describes as an “agentic AI-first operating model”.
The move, announced on 7 May 2026, affects roughly 20% of its workforce and comes even as the internet infrastructure company posted stronger-than-expected quarterly earnings.
According to Reuters, Cloudflare had 5,156 full-time employees at the end of 2025. The company expects to record between $140 million and $150 million in restructuring-related charges during the second quarter of 2026.
AI becomes central to operations
Cloudflare’s leadership framed the cuts as part of a broader operational redesign rather than a short-term cost-saving exercise. In an internal memo cited by multiple reports, Matthew Prince and Michelle Zatlyn said AI usage inside the company had surged by more than 600% over the past three months.
Teams across engineering, finance, HR and marketing are now reportedly using thousands of AI agent sessions daily to complete work that previously required larger teams. The company said the restructuring is intended to help Cloudflare move faster as AI changes how software companies operate internally.
Strong earnings failed to calm investors
The layoffs arrived alongside a solid quarterly earnings report. Cloudflare reported first-quarter revenue of about $639.8 million, ahead of analyst expectations, while adjusted earnings also beat forecasts.
However, second-quarter revenue guidance came in slightly below Wall Street estimates, triggering a sharp market reaction. Shares fell more than 13% in extended trading after the announcement. The company expects second-quarter revenue between $664 million and $665 million, compared with analyst expectations of roughly $665.3 million, according to LSEG data cited by Reuters.
Engineering hiring will continue
Despite the workforce reduction, Cloudflare indicated that some hiring will continue. Reports citing the company memo said the cuts will mainly affect back-office functions, while customer-facing sales and engineering teams are expected to remain priorities for recruitment.
Leadership reportedly compared the shift to returning to a more startup-like operating structure built around smaller, AI-assisted teams. The restructuring reflects a broader trend spreading across the technology industry, where companies are increasingly reorganising workflows around AI-assisted productivity rather than adding headcount.
Tech layoffs in 2026: AI spends reshape teams across Big Tech and beyond
AI-linked layoffs are accelerating
Cloudflare joins a growing list of technology firms connecting workforce reductions to AI adoption.
Reuters separately reported that economists at Goldman Sachs estimated AI contributed to between 5,000 and 10,000 monthly net job losses in the most exposed US industries during 2025.
Other companies, including Coinbase, PayPal and Atlassian, have also tied restructuring efforts to AI-driven operational changes in recent months. For startups and enterprises, the Cloudflare move highlights how AI is shifting from being treated as an experimental productivity layer to becoming a structural operating model.
Firms are increasingly redesigning workflows, team structures and software delivery around AI-assisted systems rather than simply adding AI features on top of existing processes.