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

CNBC reported Thursday that Cloudflare shares plunged roughly 18% in after-hours trading. The selloff came despite a first-quarter earnings beat, after the company revealed sweeping Cloudflare layoffs affecting more than 1,100 employees worldwide.

Earnings Beat Could Not Cushion the Blow

Cloudflare posted first-quarter revenue of $640 million, clearing analyst expectations of $622 million. Earnings per share came in at 25 cents, topping estimates of 23 cents. Revenue grew 34% compared with the same period last year. The company’s net loss shrank to $22.93 million from $38.45 million a year earlier. On paper, the quarter looked strong. Markets focused elsewhere.

AI Use Surged 600% in Three Months

CEO Matthew Prince said on the earnings call that agentic artificial intelligence has fundamentally altered how the business operates. He acknowledged the cuts were difficult but described them as necessary for the company’s future direction. Cloudflare disclosed in a blog post that internal AI usage jumped more than 600% over the past three months. The company is now operating under what it calls an agentic AI-first model. Prince characterized AI as the single largest growth driver the company has ever encountered.

Background: Cloudflare’s Growth Trajectory Under Pressure

Cloudflare has built its reputation as a network security and performance infrastructure provider over the past decade. The company went public in 2019 and has consistently posted high revenue growth. It has also carried persistent net losses as it invested aggressively in expansion. The shift toward AI-driven operations is part of a broader industry realignment. Several large technology firms have cited AI automation as a factor in workforce reductions this year.

Also Read: CoreWeave Revenue More Than Doubles, Topping Estimates

Guidance Offers Limited Reassurance

Cloudflare projected second-quarter revenue of between $664 million and $665 million, roughly in line with the $665 million Wall Street anticipated. Full-year revenue guidance landed between $2.805 billion and $2.813 billion, edging past consensus estimates of $2.8 billion. Full-year earnings guidance of $1.19 to $1.20 per share topped the $1.14 analysts had forecast. Despite the forward-looking optimism, investors appeared unsettled by the scale of the workforce reduction. A 20% headcount cut signals significant operational change regardless of near-term guidance.

Also Read: Datadog Stock Soars 31% on Blockbuster Earnings as AI Winners Emerge in Software

The after-hours reaction reflects broader investor unease about how aggressively AI is restructuring the technology sector’s employment base.

Read Next: AI Infrastructure Spending Drives CoreWeave’s Revenue Surge in Q1