More Productive Thanks to AI: Cloudflare Lays Off 1,100 Employees After Record Quarter

Cloudflare has announced a significant reduction in its workforce, affecting approximately 20% of its global team, which equates to around 1,100 employees. The decision was communicated alongside the financial results for the first fiscal quarter of 2026, which closed with record revenues but still showed a loss.

This is the first mass layoff in the history of the company, which was founded 16 years ago. During the conference call with investors, CEO and co-founder Matthew Prince explained that the cuts would impact nearly all teams and geographic areas, except for sales roles directly related to revenue generation.

In the quarter, the company, specialized in internet security and infrastructure services, reported revenues of $639.8 million, up 34% compared to the same period last year. However, net losses increased from $53.2 million to $62 million. Despite this, the company highlighted market-positive indicators, such as over $2.5 billion in remaining performance obligations (RPO), also growing by 34% year-over-year—this refers to revenue that has been contracted but not yet "earned" because the service is still to be delivered.

According to management, however, the workforce reduction was not linked to the need to contain costs. In a post on the company blog, Prince and co-founder and president Michelle Zatlyn stated that the reorganization reflects how a high-growth company must operate "in the era of agentic AI."

Prince explained that internal adoption of artificial intelligence has accelerated significantly in recent months. The tipping point is said to have occurred last November when several teams began recording increases in productivity described as "massive," with some employees becoming up to 10 or even 100 times more efficient than before.

The CEO also stated that the internal use of AI tools has increased by over 600% in the last three months. Much of the research and development department now uses the proprietary Workers platform, including "vibe coding" tools, while the code generated and deployed in the company’s products is subject to automated review through autonomous AI agents.

AI adoption does not only pertain to developers. According to Prince, employees in areas such as human resources, finance, and marketing perform thousands of sessions with AI agents daily to carry out their tasks. This level of automation, the executive claims, reduces the need for support staff around the most productive teams.

Despite the layoffs, Cloudflare made it clear that it will continue to hire in the future, especially for roles capable of effectively leveraging AI tools. Prince expressed his belief that by 2027, the total number of employees could return to exceed the peak levels recorded in 2026.

Before the restructuring, the company had about 5,500 employees. Cloudflare's case fits into an increasingly common trend in the tech sector, where companies like Meta, Microsoft, and Amazon are linking the spread of artificial intelligence to reorganizations and workforce reductions, even in the presence of solid economic results.