Cloudflare cuts 20% of workforce as AI adoption reshapes company operations

Cloudflare is cutting about 20% of its workforce as the internet infrastructure and cybersecurity company restructures operations around artificial intelligence adoption. The San Francisco-based company announced plans to eliminate more than 1,100 jobs globally while forecasting second-quarter revenue slightly below Wall Street expectations.

The job cuts will affect employees across all regions and functions as Cloudflare reimagines its operations for what executives call an “agentic AI era.” The company expects charges between $140 million and $150 million related to the layoffs in the second quarter. Despite beating first-quarter revenue expectations, Cloudflare shares dropped roughly 19% in extended trading following the announcement.

This move reflects a broader trend of companies restructuring around AI capabilities, often at the expense of human workers. The timing is particularly significant as concerns grow about AI-driven automation accelerating job losses across multiple industries. Cloudflare’s decision comes after the company’s own AI usage increased more than sixfold over the past three months, prompting major operational changes.

CEO Matthew Prince and co-founder Michelle Zatlyn told employees the cuts reflect a complete redesign of internal processes and roles, rather than performance issues or short-term cost pressures. The company had 5,156 full-time employees at the end of 2025, making this one of the larger tech layoffs tied directly to AI adoption.

Cloudflare’s financial performance remained strong despite the restructuring announcement. First-quarter revenue hit $639.8 million, beating analyst estimates of $621.9 million. Adjusted profit reached 25 cents per share, above the expected 23 cents. However, the company’s second-quarter revenue forecast of $664 million to $665 million fell just short of analyst expectations of $665.3 million.

The company’s approach highlights how AI is changing not just what tech companies build, but how they operate internally. Cloudflare isn’t cutting jobs due to declining business – the company’s shares have risen 30.3% this year – but because AI tools are changing how work gets done across different departments and functions.

Similar AI-driven restructuring is happening across the tech sector. Payments company Block cut more than 4,000 jobs in February, nearly half its workforce, as part of an AI integration overhaul. Goldman Sachs economists estimate AI was responsible for 5,000 to 10,000 monthly net job losses in 2025 in the most exposed U.S. industries.

This trend raises important questions about the pace of AI adoption and its impact on employment. While companies like Cloudflare are seeing operational benefits from AI tools, the human cost is becoming increasingly apparent. The challenge for both companies and policymakers is managing this transition while supporting affected workers.

For Cloudflare specifically, the restructuring represents a bet that AI-optimized operations will drive future growth and profitability. The company’s strong financial performance suggests it has the resources to manage this transition, but the market’s negative reaction shows investor uncertainty about the near-term impact of such dramatic organizational changes.