‘Today’s actions are not a cost-cutting exercise’: Cloudflare is cutting 1,100 jobs as internal AI usage surges 600%

Cloudflare has announced plans to lay off 1,1,00 staff in a move the company said comes in direct response to increased AI usage.

In a blog post detailing the cuts, which equate to around 20% of its global workforce, CEO Matthew Prince and COO Michelle Zatlyn said the “way we work at Cloudflare has fundamentally changed”.

According to the duo, AI use at Cloudflare has increased by more than 600% in recent months, prompting a rethink of company structure and “how we architect our company for the agentic AI era”.

“By taking decisive action now, we provide immediate clarity to those departing and protect the stability of the team that remains,” the duo wrote.

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“We are making these changes now because making smaller, repeated cuts or dragging a reorganization out over multiple quarters creates prolonged emotional uncertainty for employees and stalls our ability to build.

“It’s the right thing to do; it’s the honest thing to do; and it reflects the values of the company we are continuing to build.”

Staff caught up in the layoffs will receive the equivalent of their full base pay through the end of 2026, according to SEC filings. That same filing noted that the company expects the cuts to cost up to $150 million.

The move comes after Cloudflare recorded first quarter revenue of $639.8 million, marking a 34% year-on-year increase. The company said it projects revenue to reach between $664-$665 million in its second quarter for 2026.

Prince noted that the company had a “very strong start to 2026” in its earnings report, specifically highlighting AI-related gains.

“AI is driving a fundamental re-platforming of the internet and a paradigm shift in how software is created and consumed,” he said. “It’s shaping up to be the biggest tailwind we’ve ever seen in Cloudflare’s history.”

Cloudflare layoffs “not a cost-cutting exercise”

The move from Cloudflare makes it the latest in a string of companies to cut staff in direct response to AI over the last year. Indeed, Cloudflare joins a host of firms to implement cuts of this kind in May alone.

On 7 May, Upwork CEO Hayden Brown informed staff the company plans to implement workforce cuts as it restructures around AI.

“Two pizza teams are dead. AI means smaller, differently resourced teams in product and engineering can make a bigger impact than ever,” he wrote in a company memo.

Elsewhere, Coinbase and Freshworks both confirmed plans to reduce headcount, again citing AI as a leading factor in layoffs.

In their blog post, Prince and Zatlyn were keen to emphasize that the decision to cut staff is not an indictment of workforce performance or productivity.

“We want to be clear that this decision is not a reflection of the individual work or talent of those leaving us,” they wrote. “Instead we are reimagining every internal process, team, and role across the company.”

“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 grass isn’t always greener

While a range of large businesses have attributed job cuts to AI over the last year, some research suggests the trend isn’t quite what it seems.

A study from Oxford Economics in January this year said companies are using AI as a convenient excuse for job cuts, which are typically down to “more traditional drivers” such as poor financial performance or overhiring.

Indeed, OpenAI CEO Sam Altman suggested a large portion of layoffs aren’t due to the technology taking jobs, but are part of an “AI washing” trend taking the industry by storm.

AI-related layoffs have proved to be a double-edged sword for enterprises, research shows. A survey in May 2025 found roughly one-third of UK firms had cut staff in favor of AI, but later regretted the decision, with many facing internal skills shortages as a result.

A study from Gartner this month also found that AI-related cuts frequently fail to deliver financial benefits or a return on investment.

"Many CEOs turn to layoffs to demonstrate quick AI returns; however, this disposition is misplaced," said Helen Poitevin, distinguished VP analyst at Gartner. "Workforce reductions may create budget room, but they do not create return."

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