May 7 (Reuters) – Cloudflare said on Thursday it would lay off about 20% of its workforce as part of a shift toward an “agentic AI-first operating model,” as the internet services company restructures around artificial intelligence.
Shares of Cloudflare fell 14% in extended trading, despite posting stronger-than-expected quarterly results.
The company is cutting more than 1,100 jobs, the latest layoff tied to AI in the tech sector, as companies rush to automate work and reshape products around the technology.
CEO Matthew Prince and co-founder Michelle Zatlyn said in a joint statement that the layoffs reflect a shift to an AI-driven operating model, and were not a cost-cutting exercise. Cloudflare’s AI usage has risen more than 600% in three months, they said.
“Employees across the company from engineering to HR to finance to marketing run thousands of AI agent sessions each day to get their work done. That means we have to be intentional in how we architect our company for the agentic AI era,” the statement said.
Cloudflare, which had 5,156 full-time employees at the end of last year, expects charges between $140 million and $150 million associated with the job cuts in the second quarter.
The company expects second-quarter revenue between $664.0 million and $665.0 million, the midpoint of which is below estimates of $665.3 million, according to data compiled by LSEG. Adjusted profit is expected to be 27 cents per share, in line with estimates.
In the first quarter, the company reported revenue of $639.8 million, beating estimates of $621.9 million. Adjusted profit came in at 25 cents per share, compared with estimates of 23 cents per share.
(Reporting by Anhata Rooprai in Bengaluru; Editing by Sahal Muhammed)
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