Cloudflare shocks Wall Street with AI layoffs despite earnings beat

Cloudflare shares fell sharply in after-hours trading on Thursday after the cloud infrastructure company announced major layoffs tied to its push into artificial intelligence.

According to recent reports, the stock dropped about 18% even after Cloudflare reported first-quarter earnings and revenue that topped Wall Street expectations.

The company posted revenue of $640 million for the quarter, up 34% from a year earlier and above analyst estimates of $622 million. Adjusted earnings came in at $0.25 per share, also ahead of expectations. However, investors focused instead on Cloudflare’s decision to cut more than 1,100 jobs globally, or roughly 20% of its workforce, as part of what it called an “agentic AI-first operating model.”

Chief executive Matthew Prince said Cloudflare’s internal AI usage has jumped more than 600% over the past three months. According to the company, thousands of AI agent workflows are now being integrated into daily operations. Management described the restructuring as a long-term operational shift rather than a traditional cost-cutting exercise.

The market reaction suggested investors remain cautious about aggressive AI-driven restructuring, especially as Cloudflare also issued softer-than-expected revenue guidance for the current quarter. The company forecast second-quarter revenue between $664 million and $665 million, slightly below analyst projections.

The layoffs add to a growing trend across the technology industry as companies reorganize around AI tools and automation. Amazon has continued trimming roles across cloud computing, devices, and media divisions while increasing spending on generative AI infrastructure. Microsoft has also cut jobs in several business units over the past year as it redirected billions of dollars toward AI data centers and products tied to OpenAI technology.

Meta and Coinbase have also announced workforce reductions in recent months while emphasizing efficiency and AI-focused restructuring. Industry tracking data shows more than 93,000 technology jobs have been cut globally so far in 2026, with automation and AI adoption increasingly influencing hiring decisions.

Despite the sell-off, Cloudflare maintained its full-year outlook. The company reaffirmed projected 2026 revenue between $2.805 billion and $2.813 billion and forecast earnings per share of $1.19 to $1.20. Management said expanding AI integration across operations should improve efficiency and help the company deliver new products faster.