US-based tech firm, Cloudflare has fired over 1,100 employees globally, which is around 20 per cent of its total workforce. The company has cited restructuring operations around artificial intelligence tools and automation as the reason for layoff. The layoff came recently after the company reported first-quarter earnings and projected second-quarter revenue slightly below Wall Street expectations. According to a memo shared with employees, Cloudflare CEO Matthew Prince and co-founder Michelle Zatlyn said the company is redesigning teams and functions to align with agentic AI era. The use of AI tools has also increased inside the company more than sixfold in the past three months.
Before anything else, Matthew Prince made one thing very clear. In an email to workers, he and President Michelle Zatlyn said these layoffs are not about poor employee performance or emergency cost-cutting. Instead, the company says it is doing a full structural redesign. Cloudflare said it wanted to avoid repeated rounds of smaller layoffs by making one large reset instead. Prince called it a difficult but necessary call, saying there are roles at the company that simply do not fit into the future they are building.
The cuts were not random. Middle management faced the brunt of the layoffs. Prince described most of those let go as “measurers,” meaning people in middle management, finance, legal, internal auditing, and revenue recognition roles. The company cut people from all teams and geographies, except for salespeople who carry revenue quotas. So the folks directly selling to customers or writing code largely kept their jobs. Everyone else supporting those functions was far more exposed.
Here is the irony. The layoffs came despite increasing profits at Cloudflare. The company reported first-quarter revenue of $639.8 million, up 34 per cent from a year earlier, and ahead of analyst expectations. Yet the moment news of the cuts broke, Cloudflare’s stock sank around 24 per cent. Investors were also not thrilled with the second-quarter revenue guidance, which came in slightly below what Wall Street had hoped for.
The reason Cloudflare gives for all of this is straightforward. AI agents are now being heavily used by employees across HR, marketing, finance, and engineering, with thousands of AI agent sessions running each day. The co-founders wrote that the way work happens at Cloudflare has fundamentally changed. Prince went further, calling AI the biggest tailwind the company has ever seen in its history.
Cloudflare did not simply show people the door. Departing employees will receive severance equivalent to their full base salary through the end of 2026. US workers will get healthcare coverage until December 31. The company is also vesting equity for affected employees through August 15, and for those who had not yet hit their one-year cliff, Cloudflare will waive that requirement and provide pro-rated equity through August.
Cloudflare is not alone here. It has joined a growing list of tech companies, including Meta, Microsoft, and Amazon, that have reported strong revenue alongside mass layoffs, attributing both to their use of AI. Research from Challenger, Gray and Christmas found that 26 per cent of layoffs in April were attributed to AI, making it the leading cause of job cuts for the second month in a row. The pattern is becoming harder to ignore. Companies are growing their revenues and shrinking their headcounts at the same time, and AI is the reason given every single time.
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Syed Ziyauddin is a media and international relations enthusiast with a strong academic and professional foundation. He holds a Bachelor’s degree in Mass Media from Jamia Millia Islamia and a Master’s in International Relations (West Asia) from the same institution.
He has work with organizations like ANN Media, TV9 Bharatvarsh, NDTV and Centre for Discourse, Fusion, and Analysis (CDFA) his core interest includes Tech, Auto and global affairs.
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