Cloudflare is laying off more than 1,100 employees globally as the cybersecurity and cloud infrastructure company restructures operations around what executives described as the “agentic AI era”.
The workforce reduction was disclosed in an internal memo sent to employees on Thursday and first reported by Business Insider. The cuts came hours after Cloudflare reported first-quarter earnings that exceeded Wall Street expectations, though the company’s shares fell more than 14 per cent in after-hours trading at the time of publication.
In the memo, company leaders said Cloudflare’s internal use of AI had increased by more than 600 per cent in the past three months, fundamentally changing how teams across the organisation operate.
The company said employees across engineering, finance, HR and marketing were already running thousands of AI agent sessions daily, prompting a broad reassessment of internal structures and processes.
Executives frame cuts as organisational redesign
Cloudflare’s leadership said the layoffs were tied to a long-term operational redesign rather than a traditional cost-cutting exercise.
“The way we work at Cloudflare has fundamentally changed,” executives wrote in the memo cited by Business Insider.
The company said it was “reimagining every internal process, team, and role across the company” to operate more effectively in an AI-driven environment.
Management also stressed that the decision was not linked to employee performance.
“Today's actions are not a cost-cutting exercise or an assessment of individuals' performance,” the memo stated. “They are about Cloudflare defining how a world-class, high-growth company operates and creates value in the agentic AI era.”
The announcement places Cloudflare among a growing list of technology companies linking workforce restructuring directly to AI adoption and automation-led operational changes.
Severance and equity measures outlined
Cloudflare said departing employees would receive what it described as industry-leading support packages.
According to the memo, benefits for affected staff include:
• Full base pay through the end of 2026
• Continued healthcare support in the United States through the end of the year
• Equity vesting through August 15
• Waivers for one-year equity cliffs with prorated vesting through August
• Global notification emails sent directly from company leadership
Executives said the company intentionally chose a single large restructuring instead of multiple smaller rounds of layoffs spread across quarters.
“We've asked the team to do this only once,” the memo said, adding that prolonged uncertainty could slow execution and damage morale.
AI adoption accelerates inside technology companies
Cloudflare’s restructuring reflects a wider shift taking place across the technology industry as companies integrate AI into core business operations.
Unlike earlier automation waves focused primarily on software engineering, Cloudflare indicated that AI tools are now influencing workflows across administrative, operational and customer-facing functions.
The company described itself as both a provider and intensive internal user of AI technologies, arguing that organisational structures built before widespread AI adoption were no longer sufficient.
Executives also linked the restructuring to Cloudflare’s broader ambition to remain competitive as a digitally native business.
The memo stated that the company had historically benefited from cloud-native operations that allowed it to outpace older rivals constrained by legacy systems.
“As we've now become the leader, we cannot rest on the workflows and organizational structures that worked yesterday,” executives wrote.
Market reaction highlights investor concerns
The announcement arrived shortly after Cloudflare posted quarterly earnings that surpassed analyst expectations, underscoring the growing disconnect between financial performance and workforce stability across the technology sector.
Despite the earnings beat, investors reacted negatively to the restructuring news, with shares falling sharply in after-hours trading, according to Business Insider.
The layoffs also reinforce how AI adoption is increasingly becoming a catalyst for corporate reorganisation rather than simply a productivity tool layered onto existing operations.
Cloudflare said it plans to discuss the restructuring further during its earnings conference call and internal company meetings.
The company framed the changes as part of a broader effort to build a faster and more innovative organisation capable of operating effectively in an AI-driven business environment.