Cloudflare lays off over 1,100 employees amid AI-led restructuring
What's the story
Cloudflare, a leading cybersecurity company, has announced the layoff of over 1,100 employees worldwide. The decision comes as part of a major restructuring strategy to align its operations with artificial intelligence (AI) and AI agents. The announcement was made in an internal memo sent to employees on Thursday. The company said these changes are aimed at preparing it for the "agentic AI era," where AI-powered tools and workflows are becoming central to business operations.
AI adoption
AI usage surged by over 600% in 3 months
In the memo, Cloudflare executives revealed that the company's internal use of AI has grown by over 600% in the last three months. Employees across various departments including engineering, finance, HR, and marketing are now using thousands of AI agent sessions daily. The company emphasized that this restructuring is not related to employee performance but is a broader organizational shift toward redesigning workflows and operations around AI-led efficiency.
Severance packages
Severance packages for affected employees
Cloudflare has promised severance packages for affected employees, including full base pay through the end of 2026. US-based employees will also get healthcare coverage for the rest of the year. The company confirmed that stock equity for departing employees will continue vesting until August 15. Those who haven't completed their one-year vesting period will also receive prorated equity benefits.
Market impact
Redesigning operations around AI
Cloudflare CEO Matthew Prince and co-founder Michelle Zatlyn said the company is reimagining every team and function to operate in what they call an agentic AI era. The job cuts are part of a redesign of internal processes and roles, not a response to employee performance or short-term cost pressures. Despite stronger-than-expected first-quarter results, Cloudflare shares fell by nearly 19% in extended trading on Thursday.
Financial forecast
Cloudflare's strong Q1 results but cautious outlook ahead
In Q1, Cloudflare reported revenue of $639.8 million, beating analysts' estimate of $621.9 million. Adjusted profit was 25 cents per share, above expectations of 23 cents per share. However, the company expects second-quarter revenue between $664 million and $665 million—just below analysts' estimate of $665.3 million.