Cloudflare announces global layoffs of 20%, with AI usage increasing by more than 600% over three months

According to Reuters on May 7, U.S. internet infrastructure and security company Cloudflare (NYSE: NET) announced layoffs of about 20% of its global workforce—more than 1,100 people—due to a business reorganization around the application of AI tools. Cloudflare CEO Matthew Prince said in a statement that AI usage has increased by more than 600% over the past three months.

Layoff scale, severance plan, and expected reorganization costs

According to Cloudflare’s official statement, the layoff scale exceeds 1,100 people, accounting for about 20% of its full-time workforce of 5,156 as of the end of 2025. Affected employees leave immediately after the notice is issued.

According to the official blog statements from Prince and Zatlyn, the severance plan includes: paying full base salary through the end of 2026, as well as stock options. The statement describes it as “the best severance package in the industry.”

Cloudflare expects this reorganization to incur a one-time charge of $140 million to $150 million in the second quarter of 2026. According to the statement, affected employees receive immediate notifications sent to both their personal email and company email.

AI transformation logic: business reorganization definition and CEO statement

According to Cloudflare’s official blog statement, Prince said the company is “redesigning every team and function to adapt to the era of agentic AI,” and directly stated in the statement: “Today’s actions are not about cutting costs.” He emphasized that the purpose of the reorganization is to “define how Cloudflare, as a world-leading high-growth company in the agent-based AI era, will operate and create value.”

Prince added in the same statement: “By taking decisive action now, we can protect the stability of the remaining teams. Repeated small layoffs or delaying the reorganization by a few quarters would create long-term emotional instability for employees.”

Second-quarter financial guidance and stock price reaction after-hours

According to Reuters, Cloudflare’s revenue guidance for Q2 2026 is $664 million to $665 million, slightly below analysts’ consensus expectation of $665.3 million. Despite first-quarter revenue and earnings both exceeding market expectations, Cloudflare’s stock price still fell by about 19% in after-hours trading after the layoff announcement.

Frequently asked questions

What is the reason for Cloudflare’s layoffs?

According to an official statement released by Cloudflare CEO Matthew Prince on May 7, 2026, the layoffs are the result of a business reorganization centered on the application of AI tools. The company said AI usage increased by more than 600% within three months, and Prince clearly stated that the action was not based on employee performance evaluations or short-term cost pressure.

What are the layoff size and severance plan at Cloudflare?

According to Cloudflare’s official statement, the number of layoffs is more than 1,100 people—about 20% of its global workforce (5,156 full-time employees as of the end of 2025). The severance plan includes paying full base salary through the end of 2026 and stock options, and the expected related reorganization costs are $140 million to $150 million.

What is Cloudflare’s 2026 Q2 financial guidance and how did the stock perform after-hours?

According to Reuters, Cloudflare’s Q2 2026 revenue guidance is $664 million to $665 million, slightly below analysts’ consensus expectation of $665.3 million. Even though Q1 results beat expectations, the stock fell by about 19% in after-hours trading after the layoff announcement.