Cloudflare announced on May 8, 2026, its first mass layoffs in its history, cutting 1,100 jobs. The company is nevertheless reporting record quarterly revenue and justifies this decision by productivity gains linked to AI.
A record quarter that did not protect 20% of the workforce
The paradox is immediate. In the first quarter of 2026, Cloudflare recorded $639.8 million in revenue, a 34% increase year-on-year, according to its financial report filed with the SEC. This is the best quarter in the company's sixteen-year history. Yet, it was precisely on the day of this publication that the company chose to announce the elimination of 20% of its global workforce.
Profitability, however, remains out of reach. The net loss for the quarter stands at $62 million, compared to $53.2 million in the same period a year earlier. Revenue growth was therefore not enough to reduce the deficit, even if the latter represents a slightly smaller portion of turnover. To reassure investors, Cloudflare highlights its remaining performance obligations, what the industry calls RPO ("remaining performance obligations"): they exceed $2.5 billion, with annual growth of 34%, reflecting a solid order book that has not yet been delivered.
November 2025, the internal shift that changed everything
The elimination of these positions is not presented by management as a cost-saving measure. Matthew Prince, co-founder and CEO, placed the decision within a much deeper transformation during the analyst conference on May 8, 2026. According to him, the tipping point occurred in November 2025, when Cloudflare began to observe massive productivity gains internally, which he described as massive. "It was like going from a manual screwdriver to an electric screwdriver," he stated during the call, describing employees who became two, ten, or even a hundred times more efficient than before. (It was like going from a manual to an electric screwdriver.)
Since then, internal AI usage at Cloudflare has increased by over 600% in three months. Almost the entire research and development team now uses the company's Workers platform, including its "vibe coding" feature, which allows developers to produce code with AI assistance. Matthew Prince specified that 100% of the code produced and deployed in production is now reviewed by autonomous AI agents. The adoption is not limited to engineers: teams as diverse as human resources, finance, and marketing execute thousands of AI agent sessions daily to conduct their day-to-day work.
1,100 Cloudflare layoffs: who is affected and why
On May 7, 2026, Matthew Prince and Michelle Zatlyn, co-founder and Chief Operating Officer (COO), sent a message to all of Cloudflare's global teams, published the same day on the company's official blog. "We are reimagining every internal process, every team, and every role within the company," they wrote in this post. "Today's actions are not a cost-cutting exercise or an assessment of individual performance: they are about defining how a leading, high-growth company operates and creates value in the agentic AI era." (Today's actions are not a cost-cutting exercise or an assessment of individuals' performance; they are about Cloudflare defining how a world-class, high-growth company operates and creates value in the agentic AI era.)
The layoffs affect all teams and all geographic regions, with one notable exception: sales staff whose compensation is directly linked to revenue targets are being retained, specified Thomas Seifert, Chief Financial Officer (CFO), during the analysts' conference. The logic put forward by Matthew Prince is straightforward: employees augmented by AI need less support staff around them. "Many of the support roles that existed behind them will not be the ones that drive companies forward in the future," he stated during this call. Cloudflare had approximately 5,500 employees at the end of the first quarter of 2026, before the departures were implemented.
Severance packages designed to "exceed" industry standards
On the human aspect, Cloudflare has opted for an approach that differs from the usual practice of large tech companies. Matthew Prince and Michelle Zatlyn specified in their post published on the company's official blog that employees leaving the company will receive severance equivalent to their full base salary until the end of 2026. For employees based in the United States, health coverage is maintained until the end of the year. Stock vesting rights are extended until August 15, 2026, and the one-year cliff period is waived for those who had not yet reached this deadline, with a pro-rata calculation until August. "Acting with empathy is not about avoiding difficult decisions, but about treating people with respect when those decisions are made," they wrote in this post, stating their intention to offer severance packages that "lead the industry."
Matthew Prince also indicated that the company wished to proceed in one go rather than in successive waves, in order to avoid the prolonged uncertainty generated by reorganizations spread over several quarters.
A trend spreading throughout the tech industry
Cloudflare is not alone in taking this dual approach. The company joins a growing list since the beginning of 2026: Meta, Microsoft, and Amazon have also presented waves of layoffs amidst revenue growth, each time citing productivity gains generated by AI. The pattern is now widespread enough to constitute a fundamental trend in the sector.
What distinguishes Cloudflare's case is the precision of the reasoning and the speed of the claimed transformation. In less than six months after an precisely identified tipping point, management decided to restructure 20% of its workforce. When questioned by an analyst about the necessity of such a deep cut after such a strong quarter, Matthew Prince summarized his position in a brief formula: "Just because you're fit doesn't mean you can't get fitter." (Just because you're fit doesn't mean you can't get fitter.) He also predicted that Cloudflare would have more employees in 2027 than at any point in 2026, betting that people who fully adopt AI tools are "so much more productive" that they will justify new hires on their own.
The real question posed by this decision remains open: do these job cuts reflect an authentic structural transformation, or do they serve as a convenient justification for budgetary discipline that revenue growth alone is no longer sufficient to legitimize in the eyes of the markets? The coming quarters will provide an initial answer. Investors and tech sector employees would be well advised to closely monitor how this workforce recomposition translates into Cloudflare's operational results in the second half of 2026.
No comments yet — start the discussion!