Cloudflare on Thursday joined a growing list of tech companies — including Meta, Microsoft and Amazon — reporting increased revenue alongside massive layoffs, attributing both trends to the use of artificial intelligence.
Cloudflare, which provides Internet security and performance services to millions of websites worldwide, said it is cutting its workforce by about 20%, or 1,100 people, it said in its first-quarter 2026 earnings report on Thursday.
“We’ve never done anything like this in the history of Cloudflare,” co-founder and CEO Matthew Prince he said Thursday on the quarterly conference call, marking the first mass layoff in the company’s 16-year history. The company is cutting people from all teams and geographies except for salespeople who have revenue quotas, CFO Thomas Seifert explained on the call.
News of the workforce cuts came as the company was mentioned quarterly revenue of $639.8 million, up 34% year-over-year and the highest 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 prior quarter.
That widening loss, even as revenue grew, underscores a familiar paradox in Cloudflare’s history: The company is growing fast, but has yet to turn a steady profit. But the loss was a smaller percentage of revenue, and the quarter combined with many other positive indicators. For example, Cloudflare reported that it had over $2.5 billion in “remaining performance obligations,” a year-over-year increase of 34%. RPO is the favorite metric these days to indicate revenue under contract but not yet delivered.
Therefore, Prince insisted, the 20% cuts were not to cut costs, but were strictly due to the use of artificial intelligence.
“Today’s actions are not a cost-cutting exercise or a people performance review; they are about Cloudflare defining how a world-class, high-growth company operates and creates value in the age of artificial intelligence,” Prince and Cloudflare co-founder and president Michelle Zatlyn. he wrote in a related blog post about layoffs.
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Prince acknowledged on the call that even though Cloudflare sells AI-powered products, it was initially cautious about adopting AI itself.
“Internally, the tipping point was last November. At that point, across all of our teams, we started seeing huge productivity gains, team members who were two, 10, even 100 times more productive than before. It was like going from a manual to an electric screwdriver,” he described.
“Cloudflare’s use of AI has grown by more than 600% 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 Workers platform — a tool that allows developers to build and run software directly on Cloudflare’s global network — including the vibe coding feature. He also noted that 100% of the code produced this way and developed for use in Cloudflare’s products is “now 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 and marketing conduct thousands of AI agent sessions every day to get their work done.”
As a result, these highly productive AI employees require less support staff, he argued.
“A lot of the support people that provide support behind them, those roles are not going to be the roles that, you know, drive the companies forward,” Prince said.
Interestingly, Prince says that Cloudflare “will continue to hire people and we’ll continue to invest in them because the people who are embracing these tools are far more productive than we’ve ever seen before. I imagine we’ll have more employees in 2027 than at any point in 2026.”
Cloudflare said it ended the first quarter before the layoffs with about 5,500 employees.
The pattern Prince described — the growth of AI profits as an excuse for workforce reductions even during a period of strong revenue growth — is quickly becoming a familiar scenario across the tech industry. Whether it reflects real structural transformation or acts as a convenient cover for cost discipline is a question that investors and workers will wrestle with for some time to come.
When asked by an analyst on the call why the company had to make such deep cuts after such a good quarter, Prince said, “Just because you’re in shape doesn’t mean you can’t get better.”
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