Cloudflare says AI has made 1,100 jobs obsolete, even as revenue reaches a record high

Cloudflare on Thursday joined a growing list of technology companies — including Meta, Microsoft and Amazon — that have reported revenue increases alongside mass layoffs, attributing both trends to their use of artificial intelligence.

Cloudflare, which provides internet security and performance services to millions of websites around the world, announced it will reduce its workforce by about 20%, which equates to 1,100 people, as part of its first-quarter 2026 earnings report on Thursday.

“We’ve never done anything like this before in Cloudflare’s history,” co-founder and CEO Matthew Prince said Thursday on a quarterly conference call, marking the first mass layoffs in the company’s 16-year history. The company is cutting people from all teams and geographies except for salespeople who hold revenue quotas, CFO Thomas Seifert detailed on the call.

News of the workforce reduction came as the company reported quarterly revenue of $639.8 million, an increase of 34% year over year and the highest quarterly revenue in the company’s history. However, this was coupled with a loss of $62.0 million compared to a loss of $53.2 million in the same quarter last year.

This growing loss, even as revenue rises, highlights a familiar paradox in the Cloudflare story: The company is growing quickly but has yet to achieve consistent profits. But the loss was a smaller proportion of revenue, and the quarter was coupled with plenty of other positive indicators. For example, Cloudflare reported that it has more than $2.5 billion in “remaining performance obligations,” a 34% year-over-year growth. RPO is the preferred metric these days to indicate revenue under contract but not yet delivered.

Hence, Prince insisted that the 20% cuts were not aimed at cutting expenses, but rather due to its use of artificial intelligence.

“Today’s actions are not a cost-cutting exercise or an evaluation of people’s performance; they are about Cloudflare’s definition of how a global, high-growth company operates and creates value in the age of agentic AI,” Michelle Zatlin, Prince and Cloudflare’s co-founder and chief operating officer, wrote in a related blog post about the layoffs.

Prince admitted on the call that although Cloudflare was selling AI-powered products, it was initially cautious about adopting AI itself.

“Internally, the turning point was last November. At that point, we started seeing massive productivity gains across our teams, with team members becoming two, 10, or even 100 times more productive than they had been before. It was like going from a manual screwdriver to an electric screwdriver,” he described.

“Cloudflare’s use of AI has increased by more than 600% in the past three months alone,” he added.

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

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

As a result, these highly productive, AI-driven employees need fewer support staff.

“A lot of the supportive people behind them, those are not going to be the roles that, you know, move companies forward,” Prince said.

Interestingly, Prince says Cloudflare “is going to continue to hire people, and we’re going to continue to invest in them because people who are adopting these tools are much more productive than we’ve ever seen before. And I think in 2027 we’ll have more employees than we ever had in 2026.”

Cloudflare said it finished the first quarter before the layoffs with about 5,500 employees.

The pattern Prince described — deploying AI gains as a justification for workforce reductions even during a period of strong revenue growth — has quickly become a familiar script across the tech industry. Whether this reflects a true structural shift or serves as a convenient cover for cost discipline is a question that investors and employees will grapple with for some time to come.

When an analyst asked him by phone why the company needed to cut so hard after such a good quarter, Prince said: “Just because you’re fit doesn’t mean you can’t get fitter.”