Cloudflare lays off 20% of workforce (1,100 employees) citing increased use of AI-powered tools

Cloudflare is eliminating 1,100 positions, representing 20% of its staff. Co-founders Matthew Prince and Michelle Zatlyn stated in an email that 'the way we work at Cloudflare has fundamentally changed' and the company is preparing for the 'agentic AI era' (AI agents that autonomously perform tasks like generating code).

In the last three months, Cloudflare's use of AI jumped more than 600%. Employees across engineering, HR, finance, and marketing are running 'thousands of AI agent sessions each day' to complete their work.

The company estimates severance and restructuring costs between $140 million and $150 million for 2026. Cloudflare reported first-quarter revenue of $639.8 million (up 34% year-over-year) but projected second-quarter revenue of $664 million to $665 million, falling short of Wall Street's $666 million expectation. Stock dropped around 18% in after-hours trading.