Cloudflare cuts 1,100 employees in AI overhaul, stock sinks after earnings report

Cloudflare shared their first-quarter financial results on Thursday surpassing analyst forecasts, yet their stock declined by 18% in after-hours trading as they disclosed a 20% workforce reduction.

The company mentioned in a blog post that they are letting go of over 1,100 staff members, noting that advanced artificial intelligence (AI) has "profoundly transformed" their operations.

"This was a challenging decision, but it's the correct one," CEO Matthew Prince expressed during the earnings call, highlighting positions within the company "that are no longer essential for our future goals."

The firm noted a 600% surge in its AI utilisation over the past quarter as it moves towards "a dynamic AI-centered operational model."

Cloudflare's revenue for the first quarter rose by 34% compared to the previous year. Their second-quarter revenue expectations range from $664 million to $665 million, meeting analysts' forecasts of $665 million.

The company's second-quarter earnings guidance of 27 cents per share is also aligned with Wall Street predictions.

Prince, in the earnings release, described AI's expansion as the company’s greatest historical advantage.

The firm projects its total year revenue for 2026 to be between $2.805 billion and $2.813 billion, slightly ahead of the estimated $2.8 billion.

Cloudflare anticipates full-year earnings between $1.19 and $1.20 per share, beating the estimates of $1.14.

Cloudflare declared a net loss of $22.93 million, translating to a 7-cent loss per share in the first quarter of 2026.

The previous year, they recorded a net loss of $38.45 million, equating to an 11-cent loss per share.