Cloudflare cuts 1,100 jobs (20% of workforce) while reporting record quarterly revenue of $639.8 million, citing AI productivity gains

Cloudflare announced a workforce reduction of approximately 1,100 people (20% of headcount) in its first quarter 2026 earnings report on Thursday. CEO Matthew Prince called it the company's first mass layoff in its 16-year history. The cuts span all teams and geographies except salespeople with revenue quotas.

The company reported quarterly revenues of $639.8 million, a 34% year-over-year increase and the highest single quarter in its history. Prince attributed the layoffs not to cost-cutting but to structural changes needed in the 'agentic AI era'—stating that employees using AI internally showed productivity gains of 2×, 10×, or even 100× compared with prior performance. Cloudflare's internal AI usage increased by more than 600% in the last three months alone.

The company ended the quarter with approximately 5,500 employees before layoffs. Despite strong revenue growth, Cloudflare reported a loss of $62.0 million (compared with $53.2 million in the year-ago quarter), though the loss was a smaller percentage of revenue. Prince said the company 'will continue to hire people' and predicted it will have more employees than at any point in 2026 by the end of 2027.