Cloudflare, the San Francisco-based internet infrastructure and cybersecurity company, announced on Thursday that it will cut more than 1,100 jobs — approximately 20% of its global workforce — as it restructures its operations around the rapid adoption of artificial intelligence tools. The company, which had 5,156 full-time employees at the end of 2024, expects to incur charges of between $140 million and $150 million related to the layoffs in the second quarter.
CEO Matthew Prince and co-founder Michelle Zatlyn framed the decision not as a response to financial strain or employee performance, but as a deliberate reimagining of how the company operates. In a message to staff, they described the shift toward what they called an "agentic AI-first operating model" — one in which AI systems act with greater autonomy across business functions. Cloudflare said its internal use of AI has grown more than sixfold over the past three months alone, prompting sweeping changes to team structures and workflows.
Despite the restructuring announcement, Cloudflare's underlying financial performance has been strong. In the first quarter, the company reported revenue of $639.8 million, beating analyst expectations of $621.9 million, with adjusted profit of 25 cents per share against forecasts of 23 cents. Its second-quarter revenue guidance of $664 million to $665 million came in marginally below Wall Street's estimate of $665.3 million. Markets reacted sharply nonetheless, with shares falling roughly 19% in after-hours trading, even as the stock remains up around 30% for the year.
The announcement reflects a broader trend reshaping the technology sector and beyond. Payments company Block said in February it would eliminate more than 4,000 positions — nearly half its workforce — as part of a similar AI-driven reorganisation. Goldman Sachs economists have estimated that AI is already responsible for between 5,000 and 10,000 net job losses per month in 2025 in the most exposed US industries, underlining how quickly automation is transforming employment across sectors.
Why this matters: Cloudflare's move is a prominent example of what economists and labour analysts have long warned about — AI adoption enabling companies to operate with significantly fewer people, even during periods of strong revenue growth. Unlike traditional layoffs driven by downturns, these cuts are being positioned as structural and permanent, raising deeper questions about the long-term impact of AI on skilled knowledge work.