Cloudflare says AI made 1,100 jobs obsolete, even as revenue hit a record high

Cloudflare connected Thursday joined a increasing database of tech companies — including Meta, Microsoft, and Google — that person reported accrued gross alongside and monolithic layoffs, attributing some trends to their usage of AI.

Cloudflare, which provides net information and show services to millions of websites worldwide, announced it was cutting its workforce by astir 20%, which equates to 1,100 people, it said arsenic portion of its archetypal 4th 2026 net study connected Thursday.

“We’ve ne'er done thing similar this successful Cloudflare’s history,” co-founder and CEO Matthew Prince said Thursday connected the quarterly league call, marking the archetypal wide layoff successful the company’s 16-year history. The institution is cutting radical from each teams and geographies but for salespeople who transportation gross quotas, CFO Thomas Seifert elaborate connected the call.

The quality of the workforce cuts came arsenic the institution reported quarterly revenues of $639.8 million, a 34% year-over-year summation and the highest azygous 4th successful the company’s history. However, this was coupled with a nonaccomplishment of $62.0 cardinal compared with losing $53.2 cardinal successful the year-ago quarter.

That widening loss, adjacent arsenic gross surged, highlights a acquainted paradox successful Cloudflare’s story: the institution is increasing accelerated but has yet to crook a accordant profit. But the nonaccomplishment was a smaller percent of revenue, and the 4th was coupled with a batch of different affirmative indicators. For instance, Cloudflare reported that it had implicit $2.5 cardinal successful “remaining show obligations,” a year-over-year maturation of 34%. RPO is the favourite metric these days to bespeak gross nether declaration but not yet delivered.

Hence, Prince insisted, the 20% cuts were not to trim expenses but were strictly due to the fact that of its usage of AI.

“Today’s actions are not a cost-cutting workout oregon an appraisal of individuals’ performance; they are astir Cloudflare defining however a world-class, high-growth institution operates and creates worth successful the agentic AI era,” Prince and Cloudflare co-founder and COO, Michelle Zatlyn, wrote in a related blog station astir the layoffs.

Prince acknowledged connected the telephone that adjacent though Cloudflare has been selling AI-powered products, it was astatine archetypal cautious astir adopting AI itself.

“Internally, the tipping constituent was past November. At that point, crossed our teams, we began to spot monolithic productivity gains, squad members that were two, 10, adjacent 100 times much productive than they had been before. It was similar going from a manual to an electrical screwdriver,” helium described.

“Cloudflare’s usage of AI has accrued by much than 600% successful the past 3 months alone,” helium added.

Prince highlighted the interior usage of AI coding, saying that virtually the full R&D squad is present utilizing the company’s ain Workers level — a instrumentality that lets developers physique and tally bundle straight connected Cloudflare’s planetary web — including its vibe coding feature. He besides noted that 100% of the codification produced this mode and deployed for usage successful Cloudflare’s products is “now reviewed by autonomous AI agents.”

But it’s not conscionable developers who are utilizing AI internally, helium said. “Employees crossed the institution from engineering to HR to concern to selling tally thousands of AI cause sessions each time to get their enactment done.”

As a result, these highly productive, AI-powered employees necessitate less enactment staff, helium argued.

“A batch of the enactment radical that supply enactment down them, those roles aren’t going to beryllium the roles that, you know, thrust companies going forward,” Prince said.

Interestingly, Prince says that Cloudflare “will proceed to prosecute people, and we’ll proceed to put successful them due to the fact that the radical that are embracing these tools are conscionable truthful overmuch much productive than we’d ever seen before. I would conjecture that successful 2027 we’ll person much employees than we did astatine immoderate constituent successful 2026.”

Cloudflare said it ended its archetypal 4th earlier layoffs with a headcount of astir 5,500.

The signifier Prince described — deploying AI gains arsenic justification for workforce reductions adjacent during a play of beardown gross maturation — is accelerated becoming a acquainted publication crossed the tech industry. Whether it reflects existent structural translation oregon acts arsenic convenient screen for outgo subject is simply a question that investors and employees volition beryllium wrestling with for immoderate clip to come.

When asked by an expert connected the telephone wherefore the institution needed to chopped truthful profoundly aft specified a bully quarter, Prince said, “Just due to the fact that you’re acceptable doesn’t mean you can’t get fitter.”