Cloudflare Cuts 1,100 Jobs and Stock Drops 18% Despite Earnings Beat

CNBC reported Thursday that Cloudflare shares fell sharply in after-hours trading despite the cloud networking firm posting a Q1 earnings beat. The company simultaneously announced Cloudflare layoffs affecting more than 1,100 workers globally, roughly one-fifth of its total headcount. Shares tumbled approximately 18% on the news.

Earnings Beat Could Not Offset Workforce Shock

Cloudflare posted first-quarter earnings of 25 cents per share against an analyst consensus of 23 cents. Revenue reached $640 million, topping the $622 million Wall Street had penciled in. The top-line result also represented 34% growth compared with the same period a year earlier. Despite those headline beats, investors focused heavily on the scale of the announced job reductions.

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AI Usage Surged 600% in Three Months

CEO Matthew Prince told analysts the company has adopted what it calls an “agentic AI-first operating model.” Internal use of AI tools surged more than 600% in just the last three months. Prince acknowledged the difficulty of the decision but said certain roles simply do not fit the company’s direction going forward. A company blog post described agentic AI as having “fundamentally changed” how work gets done across the business. Prince also called AI the single largest tailwind Cloudflare has ever encountered in its history.

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Background: A Year of Narrowing Losses

Cloudflare has been steadily reducing its net losses over the past year. The company recorded a Q1 net loss of roughly $22.9 million, down considerably from a $38.5 million loss in the same quarter of 2025. That progress on the bottom line has been a consistent theme for the firm as it scales revenue while managing costs. The latest workforce reduction appears designed to accelerate that trajectory further under an AI-driven cost structure.

Guidance Remains Broadly in Line With Estimates

For the second quarter, Cloudflare guided revenue to a narrow range around $664 million to $665 million, essentially matching analyst expectations. Per-share earnings guidance of 27 cents for Q2 also aligned with consensus. Full-year 2026 revenue guidance of approximately $2.81 billion nudged ahead of the $2.8 billion estimate, while full-year earnings guidance of $1.19 to $1.20 per share beat the $1.14 consensus. Investors will now weigh whether the restructuring accelerates margin improvement or signals deeper operational disruption ahead.

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