In a message to employees, Cloudflare CEO Matthew Prince and co-founder Michelle Zatlyn said: “We are writing to let you know directly that we’ve made the decision to reduce Cloudflare’s workforce by more than 1,100 employees globally.”

“The way we work at Cloudflare has fundamentally changed. We don’t just build and sell AI tools and platforms. We are our own most demanding customer. Cloudflare’s usage of AI has increased by more than 600 per cent in the last three months alone,” the message added.

According to the company, employees across departments including engineering, human resources, finance and marketing now run thousands of AI agent sessions daily to complete tasks.

“That means we have to be intentional in how we architect our company for the agentic AI era in order to supercharge the value we deliver to our customers and to honour our mission to help build a better Internet for everyone, everywhere,” the executives said.

Cloudflare clarified that the layoffs are not part of a cost-cutting exercise or linked to employee performance evaluations.

Strong quarterly performance

Despite the restructuring, the company reported strong financial results for the first quarter of fiscal 2026.

Cloudflare posted total revenue of $639.8 million, up 34 per cent year-on-year.

GAAP gross profit stood at $455.6 million, with a gross margin of 71.2 per cent, compared to $363.5 million and a 75.9 per cent margin in the same quarter last year.

The company reported a GAAP operating loss of $62 million, compared to $53.2 million a year earlier. However, non-GAAP operating income rose to $73.1 million from $56 million.

GAAP net loss narrowed to $22.9 million from $38.5 million in the corresponding quarter of fiscal 2025, while non-GAAP net income rose to $94 million from $58.4 million.

Cloudflare also reported improved cash flow, with net cash flow from operating activities reaching $158.3 million and free cash flow rising to $84.1 million.

As of March 31, 2026, the company held cash, cash equivalents and available-for-sale securities worth $4.16 billion.

Restructuring costs

Cloudflare said it expects to incur restructuring charges between $140 million and $150 million as part of the layoffs.

These costs will primarily include severance payments, employee benefits, notice period expenses and non-cash share-based compensation costs.

The company said most of the restructuring expenses are expected to be recorded in the second quarter of fiscal 2026, with the process likely to be substantially completed by the end of the third quarter.