The cuts, announced on May 7 alongside first-quarter earnings, will cost the company between $140 million and $150 million in restructuring charges, the majority of which will be recognised in Q2 2026. Cloudflare had 5,156 full-time employees at the end of 2025. The company said it expects the restructuring to be substantially complete by the end of Q3.

In an email to staff, co-founder and CEO Matthew Prince and co-founder and COO Michelle Zatlyn framed the decision as structural rather than cyclical. “The way we work at Cloudflare has fundamentally changed,” they wrote. “We don’t just build and sell AI tools and platforms. We are our own most demanding customer.” The company said its internal use of AI had grown more than 600% in the past three months.

Prince was equally direct in the earnings release, describing AI as “driving a fundamental re-platforming of the Internet and a paradigm shift in how software is created and consumed,” and calling it “the biggest tailwind we’ve ever seen in Cloudflare’s history.”

The executives said the scale and speed of the cuts was deliberate. “Making smaller, repeated cuts or dragging a reorganisation out over multiple quarters creates prolonged emotional uncertainty for employees and stalls our ability to build,” they told staff, adding that the company was hoping to avoid further major layoffs.

The financial results themselves were strong. First-quarter revenue reached $639.8 million, up 34% year-on-year, with growth of 34% in the US, 31% across EMEA and 34% in Asia-Pacific. The company raised its full-year 2026 revenue guidance to between $2.805 billion and $2.813 billion, ahead of the prior consensus of $2.8 billion, and lifted its full-year earnings per share outlook to $1.19–$1.20 against analyst expectations of $1.14.

Second-quarter revenue guidance of $664–$665 million came in fractionally below the Wall Street consensus of $665.3 million. Cloudflare’s shares fell 18% in after-hours trading following the announcement.

Cloudflare is not alone. The same week, Coinbase announced it was cutting 14% of its workforce and PayPal was reported to be planning reductions of around 20%.

The pattern reflects a growing willingness among technology companies to cite AI-driven efficiency gains as direct justification for headcount reductions, rather than attributing cuts to macroeconomic conditions or strategic pivots in the conventional sense.

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