Cloudflare cuts 20% workforce while posting record revenue

Cloudflare announced its first-ever mass layoff, cutting 1,100 employees, or 20% of its workforce, on Thursday while reporting record quarterly revenue of $639.8 million, a 34% year-over-year surge.

The Cloudflare CEO, Matthew Prince, justified the apparently paradoxical action not because of any cost-saving strategy but due to the productivity gains through artificial intelligence technology that has rendered certain jobs obsolete within the firm.

"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," Prince and co-founder Michelle Zatlyn wrote in a related statement.

Prince said the internal shift accelerated in November 2024, when employees across engineering, HR, finance, and marketing began experiencing dramatic efficiency gains.

"It was like going from a manual to an electric screwdriver," he told investors, describing productivity increases of 2x to 100x for individual team members.

Cloudflare's internal AI usage surged more than 600% in just three months. The company's entire R&D team now uses its Workers platform with AI coding features, and 100% of code produced this way is reviewed by autonomous AI agents before deployment. Employees across all departments run thousands of AI agent sessions daily to complete work.

Prince’s logic attacked the support positions head-on. Because of the efficiency gains of the developers and professionals, the infrastructure supporting them had become redundant. “A lot of the support people that provide support behind them, those roles aren’t going to be the roles that drive companies going forward,” Prince stated.

The layoffs did not touch any sales force personnel whose responsibility was to generate revenues; rather, they took place in all other departments. However, despite the layoffs, the firm registered an operating loss of $62 million compared to last year’s loss of $53.2 million as revenue increased.