Cloudflare Cuts 20% of Its Workforce and Blames AI

‍

On May 7, 2026, Cloudflare announced it was firing roughly 1,100 employees. That is about 20% of its entire global workforce. The reason? AI has made their roles, in the company's own words, unnecessary.

What makes this story different from a typical round of tech layoffs is the raw honesty behind it. Cloudflare is not blaming a bad economy or falling revenue. It is openly said that AI is doing the work now, and these people's jobs no longer exist.

Cloudflare Cut 20% of Its Staff

In the official SEC filings, Cloudflare declared:

“On May 7, 2026, the Company announced a plan designed to further accelerate its evolution to an agentic AI-first operating model. 

As part of the Plan, the Company expects to reduce its current workforce by approximately 20%.”

‍

Cloudflare is making a major shift toward becoming an “AI-first” business, meaning it wants to rely much more heavily on AI agents to handle work that employees currently do. 

They expect the total restructuring cost to land somewhere between $140 million and $150 million.

Most of that money will go toward severance packages, notice period payments, continued employee benefits, and other costs connected to letting people go.

Cloudflare also expects the restructuring process to be mostly finished by the end of the third quarter of fiscal 2026.

Overall, this announcement signals a pretty major operational change, with Cloudflare investing heavily in AI for its future.

But there is a twist. 

Cloudflare is doing extremely well financially. In Q1 2026, the company posted revenue of $639.8 million, up 34% compared to the same period last year. It has more large customers than ever. 

So this is not a company that is struggling and needs to cut costs to survive. This is a company that is profitable and growing fast. That distinction matters enormously.

What the Cloudflare CEO Actually Said

CEO Matthew Prince did not shy away from the truth on the earnings call. He said:

“This was not an easy decision, but it is the right decision. We have seen that there are roles at Cloudflare that are not the roles we need for the future. 

Just because you are fit does not mean you cannot get fitter. 

Over the last six months, especially, the productivity gains from the people directly talking to customers and directly creating code have been incredible, and a lot of the support roles behind them are not going to be the roles that drive companies going forward.”

‍

In short, these layoffs are part of a bigger shift in how the company wants to operate in the AI era.

The CEO believes some jobs are becoming less important as AI tools improve. He’s not necessarily saying the employees were bad at their jobs, but just that the company’s priorities are changing.

This suggests the layoffs are likely targeting support or operational positions rather than core engineering or customer-facing roles. 

He even predicts that many other companies will adopt AI tools and start seeing major productivity improvements from AI.

The CEO argues that Cloudflare is already benefiting from those changes earlier than others. Employees using AI tools are apparently able to work much faster, which is pushing the company to rethink what kinds of jobs it actually needs.

But the important distinction is that the types of jobs will be very different. Instead of traditional support-heavy structures, the company likely wants more AI-focused roles.

In a new memo titled "Building for the Future," addressed to employees, Prince framed the decision as Cloudflare embracing an "agentic AI-first operating model.”

The AI usage inside the company exploded by more than 600% in just 3 months. The company claims employees across engineering, HR, finance, and marketing are now running thousands of AI-agent sessions daily to complete work.

Bottom Line

Cloudflare repeatedly said that the layoffs are not performance-related, but this is actually even worse because the CEO confirms his plans to hire more employees who know how to work effectively with AI are becoming extremely valuable.

An interesting part of his message was that he believes the company could actually end up with more employees in 2027 than it had in 2026. 

But those future jobs will look very different from the roles being eliminated today. Cloudflare appears to be shifting away from traditional support-heavy structures, and new hiring will be focused on technical and sales-related roles. 

This is why people online believe AI is being used more as a justification for layoffs rather than the true reason. 

Some argued that tech companies always have massive backlogs of work, so if AI genuinely boosted productivity, companies should theoretically build more products instead of immediately cutting staff. 

Whatever the case may be, such layoffs send a negative signal to both employees and customers. It also affects the industry. These companies spent years aggressively hiring during boom periods, only to suddenly pivot.