Cloudflare lays off 1,100 employees as AI use inside company jumps 6x

Cloudflare has laid off more than 1,100 employees globally, cutting nearly 20 per cent of its workforce as the internet infrastructure and cybersecurity company restructures operations around artificial intelligence.

The layoffs come as the San Francisco-headquartered company accelerates internal AI adoption and redesigns teams for what executives described as an “agentic AI era”.

According to a company memo cited by The Times of India, Cloudflare’s internal use of AI tools increased more than sixfold over the past three months, triggering major operational changes across departments.

The announcement was made shortly after the company reported first-quarter earnings that beat Wall Street expectations, although Cloudflare forecast second-quarter revenue slightly below analyst estimates.

CEO says layoffs were not driven by financial weakness

In a memo sent to employees, Cloudflare CEO Matthew Prince and co-founder Michelle Zatlyn said the layoffs were not linked to business weakness but to structural shifts underway across the technology industry.

Prince later expanded on the decision in an opinion piece published in The Wall Street Journal titled How I Choose Which Cloudflare Employees to Replace With AI.

In the article, Prince said Cloudflare continued to post record revenue growth, strong free cash flow and rising customer additions despite the workforce cuts.

“We didn’t do it because Cloudflare is struggling,” Prince wrote. “We did it because business is changing, and to win the future, Cloudflare needs to change with it.”

Prince also claimed the company could not find another example in US business history of a public company growing more than 30 per cent while simultaneously cutting over 20 per cent of its workforce.

Cloudflare reorganises around AI-led operations

Prince used management concepts introduced by business thinker Peter Drucker to explain how Cloudflare categorised employees internally.

According to the op-ed, the company divided roles into three broad groups:

• Builders
• Sellers
• Measurers

Prince described builders as employees who create products, while sellers manage customer relationships and revenue generation.

He identified “measurers” as functions including:

• Internal audit
• Finance
• Legal
• Compliance
• Operations
• Middle management
• Revenue recognition

Prince argued that AI would disproportionately affect these roles because automation systems can increasingly monitor, analyse and manage organisational performance with greater efficiency.

“The vast majority of those we laid off last week were measurers,” Prince wrote.

Middle management and operations teams heavily affected

According to Prince, Cloudflare reduced layers of middle management because AI tools now allow managers to oversee larger teams more effectively while continuing to monitor performance and productivity.

The company also consolidated operations functions into a single group supported by AI-powered expertise systems.

Prince further revealed that Cloudflare significantly reduced its marketing teams and automated parts of its finance operations as AI adoption expanded internally.

He claimed the company’s internal audit systems had already evolved from reviewing selected business risks periodically to continuously auditing operational risks across the organisation.

Cloudflare also said AI tools were helping the company:

• Close financial books faster
• Reduce operational mistakes
• Improve performance tracking
• Identify high-performing employees more efficiently

Company continues hiring despite layoffs

Despite the job cuts, Cloudflare said it still has a record number of open positions and expects overall employee numbers to continue growing over time.

Prince stressed that the company would continue aggressively hiring engineers and product-focused employees as AI improves software development productivity.

“If an engineer on my team can now be 10 times as productive, I’m going to hire as many as I can find,” he wrote.

The company also revealed it received nearly 1 million applications for 1,111 paid internship positions this summer.

According to Prince, most selected interns were “AI-native” candidates focused on product building and customer-facing functions.

AI-led restructuring spreads across tech industry

Cloudflare’s restructuring reflects a wider trend across the technology sector, where companies are rapidly integrating AI into operations while reassessing workforce structures.

Over the past year, several technology firms have linked layoffs, flatter organisational hierarchies and operational restructuring to rising investments in artificial intelligence infrastructure and automation tools.

Prince argued that AI would not eliminate all jobs, but fundamentally reshape how businesses allocate talent and resources.

“AI won’t kill all jobs,” he wrote. “But it will change every business.”

As enterprises continue experimenting with AI-led operations, Cloudflare’s restructuring may become an early example of how companies redefine workforce priorities in the emerging AI economy.