Cloudflare says AI has made 1,100 jobs obsolete, as revenue hits record high

Cloudflare on Thursday joined a growing list of tech companies — including Meta, Microsoft, and Amazon — that reported earnings in line with major layoffs, pointing to both trends in their use of AI.

Cloudflare, which provides security and internet operations services to millions of websites around the world, announced that it is cutting its workforce by about 20%, which equates to 1,100 people, it said as part of its 2026 first quarter report on Thursday.

“We’ve never done anything like this in the history of Cloudflare,” founder and CEO Matthew Prince said Thursday on a quarterly conference call, marking the largest layoff in the company’s 16-year history. The company is cutting people across all teams and locations except salespeople who handle revenue shares, CFO Thomas Seifert detailed on the call.

News of the layoffs came as the company reported quarterly revenue of $639.8 million, a 34% year-over-year increase and the highest single quarter in the company’s history. However, this combined with a loss of $62.0 million compared to a loss of $53.2 million in the year-ago quarter.

That growing loss, even as revenue rises, highlights a common paradox in Cloudflare’s case: the company is growing rapidly but has yet to achieve consistent profitability. But the loss was a small percentage of revenue, and the quarter was mixed with many other positive indicators. For example, Cloudflare reported more than $2.5 billion in “remaining operating commitments,” a year-over-year growth of 34%. RPO is a favorite metric these days to show revenue under contract but not yet delivered.

Therefore, Prince insisted, the 20% reduction was not due to cost reduction but due to its use of AI.

“Today’s actions aren’t about cost-cutting or individual performance evaluations; they’re about Cloudflare explaining how a world-class, high-growth company operates and creates value in the era of AI,” said Prince and Cloudflare’s co-founder and president, Michelle Zatlyn, in a related blog post about the layoffs.

Prince admitted on the phone that while Cloudflare has been selling AI-powered products, it was initially wary of taking on AI itself.

“Internally, the last point was last November. At that time, in all our teams, we started to see big productivity gains, team members were producing twice, 10, even 100 times more than before.

“Cloudflare’s AI usage has increased by more than 600 percent in the last three months alone,” he added.

Prince highlighted the internal use of AI coding, saying that nearly the entire R&D team now uses the company’s employee platform — a tool that allows developers to build and run software directly on Cloudflare’s global network — including its vibe coding feature. He also noted that 100% of the code generated this way and used for use in Cloudflare products “is now being reviewed by autonomous AI agents.”

But developers aren’t the only ones using AI internally, he said. “Employees across the company from engineering to HR to finance to marketing run thousands of AI agent sessions each day to get their work done.”

As a result, these highly productive, AI-powered workers need fewer support workers, he argued.

“A lot of people who support people behind them, those roles are not going to be the roles that drive companies forward,” Prince said.

Interestingly, Prince says that Cloudflare “will continue to hire people, and we will continue to invest in them because the people who adopt these tools are more productive than ever.” I would predict that in 2027 we will have more workers than at any time in 2026.

Cloudflare said it ended its first quarter before layoffs with about 5,500 employees.

The pattern Prince describes — using the benefits of AI as justification for layoffs even during a period of strong revenue growth — is becoming a standard script across the tech industry. Whether it reflects true structural change or serves as a convenient cover for cost control is a question that investors and workers will be grappling with for a long time to come.

When asked by an analyst on the phone why the company needed to be so deep after such a good quarter, Prince said, “Just because you’re healthy doesn’t mean you can’t be.”