Cloudflare Announces Major Layoffs Amid AI Shift
Cloudflare is set to lay off over 1,100 employees globally as the San Francisco-based tech company undergoes a significant restructuring. The founders reported a staggering 600% increase in the company’s use of artificial intelligence in just three months.
In their quarterly report released on Thursday, Cloudflare noted a 34% year-over-year rise in revenue, reaching $639.8 million, although the announcement of substantial job cuts overshadowed this positive news.
Co-founders Matthew Prince and Michelle Zatlin shared in a candid internal memo that “the way we work at Cloudflare has fundamentally changed.” They emphasized that the company doesn’t merely create AI tools; rather, they are the ones who demand the most from these innovations. According to them, employees across departments like engineering and marketing run “thousands of AI agent sessions every day.”
The memo, which became available to the public, indicated that this transition requires a thoughtful approach to building the company in an era dominated by AI technologies. Despite the layoffs, Cloudflare reassured its employees that the reductions weren’t a result of performance issues or typical cost-cutting measures. Instead, they are aiming to “reimagine every process, team, and role” within the organization.
Founded in 2009, Cloudflare anticipates having 5,156 full-time employees by the end of 2025, signaling a workforce reduction of about one-fifth. Specific numbers regarding how many Bay Area employees will be impacted remain unknown.
In a bid for transparency, the company informed employees they would receive direct email notifications about the layoffs rather than through their managers. This approach aims to minimize lingering uncertainty by implementing a decisive reset rather than a prolonged series of cuts.
For those departing, Cloudflare is offering a generous severance package, which includes full base salary through the end of 2026, continued U.S. health insurance until the year’s end, and stock vesting through August 15 for some employees—regardless of whether they have reached the standard vesting period.
Overall, Cloudflare projects restructuring costs between $140 million and $150 million, primarily related to severance and benefits, most of which will occur in the second quarter. The tech company is shifting towards becoming AI-first, with a complete reorganization expected by the end of the third quarter.
