Cloudflare just made one of the biggest AI-related workforce cuts of 2026. The internet security and cloud company announced it will lay off more than 1,100 employees, nearly 20% of its global staff, as it reshapes the business around what it calls the “agentic AI era.”
The timing surprised many people. The company announced the layoffs on the same day it posted strong first-quarter earnings that beat Wall Street estimates. Revenue hit record levels, which made one thing very clear. This was not a company trying to survive. This was a company trying to rebuild itself around AI before its competitors move faster.
Cloudflare leaders say the decision came after seeing huge productivity gains from AI tools inside the company. According to internal memos, employees across engineering, finance, HR, marketing, and support are already using AI agents every day to handle tasks that once needed full teams. Executives described the shift as a major turning point for how work gets done.
AI Agents Changed How Cloudflare Operates
Cloudflare / IG / Cloudflare CEO Matthew Prince said the company hit a “tipping point” with AI last November. Teams started using AI agents heavily, and productivity climbed at a pace leadership did not expect.
Prince compared the change to replacing a manual screwdriver with an electric one. The same job suddenly took far less effort.
That speed boost had a direct effect on staffing needs. Some employees reportedly became two times, ten times, or even one hundred times more productive with AI support. Once that happened, the company started questioning how many support roles were still necessary. Leaders concluded that some jobs simply no longer fit the direction of the business.
The company said internal AI usage jumped by more than 600% in just three months. Employees now run thousands of AI agent sessions every day to complete routine work. That includes drafting documents, analyzing data, automating support tasks, handling workflows, and managing internal operations.
However, Cloudflare is not talking about AI as a side tool anymore. The company wants AI agents deeply built into every department. Executives described the shift as a full operating model change, not a temporary experiment. They say every process, team structure, and workflow is now being redesigned around AI systems.
Strong Earnings Couldn’t Stop the Layoffs
LinkedIn / Companies usually cut thousands of jobs during weak quarters or when revenue. Cloudflare did the opposite.
It announced layoffs while reporting strong growth and positive earnings results.
Companies are no longer waiting for financial trouble before reducing headcount. AI is changing the math around labor costs, productivity, and staffing needs much faster than many workers expected.
Prince made that point clear during the earnings call. He said AI tools are already handling tasks that once required layers of support teams. The company believes future growth will depend more on employees who can manage AI systems than on employees who perform repetitive operational work manually.
Cloudflare also pushed back against the idea that the layoffs were tied to poor employee performance. Leadership said the cuts were about restructuring the company for a new era of work. Executives framed the decision as a long-term business transformation rather than a reaction to short-term pressure.
What Happens Next for Cloudflare Employees?
Cloudflare says affected employees will receive generous severance packages. Workers who lost their jobs will continue receiving base pay through the end of 2026. In the United States, healthcare coverage will also continue through the end of the year.
The company also announced extended equity benefits. Departing employees will keep vesting shares through August 15, and workers who had not yet reached their one-year cliff will receive prorated equity vesting. That move appears designed to soften the impact and reduce frustration among affected staff.
Cloudflare expects restructuring costs between $140 million and $150 million tied to the layoffs. Most of those expenses will appear during the second quarter. Even with those costs, executives still framed the decision as necessary for long-term growth in an AI-heavy business environment.
Investors reacted nervously after the announcement. Cloudflare shares dropped sharply in after-hours trading, falling between 14% and 19% despite the strong quarterly results.