Cloudflare disappoints with its financial guidance, cuts 1,100 employees, and the stock price plunges 19% after-hours

Cloudflare’s first-quarter financial report released on Thursday showed that its revenue and profit performance both beat market expectations, demonstrating strong growth momentum. However, because the company’s revenue forecast for the second quarter is slightly lower than analysts’ estimates, concerns have emerged in the market about whether its growth momentum will continue. At the same time, Cloudflare announced it will lay off about 1,100 employees, accounting for roughly 20% of its total workforce. CEO Matthew Prince emphasized that AI and agents have become the company’s core productivity, and the operating model is undergoing a fundamental transformation. Driven by the miss on its financial guidance and news of large-scale layoffs, the company’s stock (NET) fell nearly 19% in after-hours trading.

Cloudflare posts disappointing financial guidance, stock plunges 19% after hours

Cloudflare’s first-quarter revenue was $639.8 million, up 34% from the same period last year, beating analysts’ expectations of $622.7 million. Adjusted earnings per share (Adjusted Earnings Per Share, EPS) was $0.25, also better than the market’s expected $0.23. Despite strong single-quarter results, the company expects second-quarter revenue to fall between $664 million and $665 million, below Wall Street’s forecast of $666.1 million. In a highly growth-oriented cloud computing industry, small downgrades to guidance often raise investors’ concerns about market penetration and competitive pressure, and the company’s stock (NET) fell nearly 19% in after-hours trading.

Cloudflare announces layoffs of 1,100 people

To adapt to changes in the operating environment, Cloudflare announced it will cut about 1,100 jobs to accelerate a transition to an AI-first agent operations model. CEO Matthew Prince said this decision is not just a cost-cutting move, but a strategic restructuring of the organization. As AI agents play an increasingly important role in internal processes, the company is intentionally rebuilding its operating model to enhance the value delivered to customers.

Expected to generate $140 million to $150 million in costs due to the layoffs, with most of the expenses recognized in the second quarter.

Launches AI Crawl Control to expand the enterprise market

Cloudflare is actively positioning itself as an infrastructure provider integrating security, networking, and developer services, especially to expand among large enterprise customers that spend more than $100,000 per year. The “AI Crawl Control” tool the company recently launched has drawn market attention. The tool helps website owners manage how AI systems crawl content, thereby protecting intellectual property. However, Bloomberg analyst noted that as the company continues to build out AI workloads, rising related costs such as electricity and hardware may put short-term pressure on profit margins.

This article first appeared on Chain News ABMedia: Cloudflare disappoints on financial guidance, cuts 1,100 employees, and its stock plunges 19% after hours.