Cloudflare is cutting more than 1,100 employees globally, co-founders Matthew Prince and Michelle Zatlyn announced in an internal email Thursday. The note went out hours before the company's Q1 2026 earnings call, where Cloudflare beat analyst estimates and raised its full-year guidance.
Per the version published on the company blog, the cuts are framed as a restructuring around what the founders call "the agentic AI era." Internal AI usage at Cloudflare has jumped 600% in the past three months, the email says, with employees across engineering, HR, finance, and marketing running "thousands of AI agent sessions each day."
Not cost-cutting, allegedly
The letter makes a point of insisting the move "is not a cost-cutting exercise or an assessment of individuals' performance." It repeats the claim more than once. How convincing you find that depends on how much weight you give the timing: hours before earnings, alongside an 8-K filing disclosing $140 million to $150 million in restructuring charges. Most of them land in Q2.
Severance is on the generous side. Departing employees get base pay through the end of 2026, U.S. healthcare coverage through the end of the year, and continued equity vesting through August 15. Anyone who hadn't hit their one-year cliff gets it waived and a pro-rated chunk of stock through August. Cloudflare joins Oracle, Meta, and Atlassian among 2026's AI-cited layoff announcements.
The earnings backdrop
Cloudflare's first quarter was actually fine. Revenue came in at $639.8 million, up 34% year-over-year and ahead of the $620.8 million analysts expected. Adjusted EPS hit $0.25, two cents above consensus. Full-year guidance went up: revenue between $2.805 billion and $2.813 billion, adjusted EPS between $1.19 and $1.20.
Markets weren't impressed. Cloudflare stock dropped about 18% after hours. Beating consensus by a few million on revenue, after the headcount headline, was apparently not the reassurance investors wanted.
Twenty percent is twenty percent
Cloudflare ended 2025 with 5,156 full-time employees. Cutting 1,100 brings the headcount to roughly 4,000, a ~20% reduction however you frame it. Prince called the AI moment a "paradigm shift" on the call, the kind of phrase that does a lot of work covering for a lot of different decisions.
The honest read sits somewhere between the company's pitch and the cynical version. AI tooling does change what a thousand-person engineering org needs to look like. It also, conveniently, lets you announce a 20% cut as a future-building exercise rather than belt-tightening. Prince hasn't pretended otherwise.
Cloudflare expects to finish the cuts by the end of Q3 2026. Q2 revenue guidance is $664 million to $665 million.
