Cloudflare Lays Off 1,100, Cites 600% AI Usage Surge
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- Cloudflare is laying off more than 1,100 employees globally, roughly 20% of its 5,483-person headcount as of the end of March, per a Thursday memo to staff.
- CEO Matthew Prince and leadership cited a 600%+ surge in internal AI usage over the past three months and the need to 'architect' the company for 'the agentic AI era' as the rationale for the cuts.
- Cloudflare shares fell more than 14% in after-hours trading on Thursday, hours after the company reported first-quarter earnings that beat Wall Street expectations.
- Prince clarified on X that the cuts were concentrated in back-office roles, with 'very few engineers or customer-facing sales people' impacted, and said the company will 'continue to hire like crazy' in engineering and customer-facing sales.
- The memo explicitly frames the layoffs as 'not a cost-cutting exercise,' with departing employees receiving full base pay through end of 2026, US healthcare coverage through year-end, and equity vested through August 15.
- Prince personally sent the layoff emails to every affected employee globally, rather than routing notices through managers — a practice he has historically applied to all offer letters at the company.
Why it matters: For 1,100 workers at a company that just beat Q1 expectations, the layoff is paired with a 14% after-hours stock drop. The memo's denial that this is cost-cutting is undercut by the market reaction — investors are treating the 20% headcount cut as a warning the earnings couldn't offset. The severance (full base pay through 2026, equity through August) is unusually generous for a tech layoff of this scale.
