Cybersecurity company Cloudflare plans to lay off more than 1,100 employees as it reorganizes for the “age of agent AI,” according to a memo sent to employees Thursday.
The layoffs came hours after the company announced first-quarter profits that beat Wall Street expectations, but the stock price plunged in after-hours trading (more than 14% at the time of the announcement).
Cloudflare executives said in a memo that the company’s use of AI has surged “over 600% in the past three months alone,” arguing that the company needs to rethink its AI architecture to move faster and deliver more value to customers.
The layoffs make Cloudflare the latest technology company to cite AI efficiency gains and organizational changes as reasons for job cuts.
Read the full memo below.
team: I am writing to directly inform you of this decision. Cloudflare headcount reductions More than 1,100 employees worldwide work on it. The way we work at Cloudflare has fundamentally changed. We don’t just build and sell AI tools and platforms. We ourselves are our most demanding customers. Cloudflare’s AI usage has increased by more than 600% in the past three months alone. From engineering to human resources to finance to marketing, employees across the company run thousands of AI agent sessions every day to get their jobs done. That means we need to be intentional about how we build our companies. Agent AI era We do so because we increase the value we deliver to our customers and fulfill our mission of helping build a better internet for everyone, everywhere. Today is a difficult day. This decision unfortunately means saying goodbye to our teammates who have contributed meaningfully to our mission and to growing Cloudflare into one of the most successful companies in the world. We want to be clear that this decision is not a reflection of the individual work or talent of those who leave us. Instead, we’re rethinking every process, team, and role across the company. Today’s actions are not cost reduction exercise or evaluation of individual performance. These are about Cloudflare, which is defining how world-class, high-growth companies operate and create value in the age of agentic AI. This is a moment that we, as company founders and leaders, need to recognize. Matthew personally sent us all of our offer letters. It’s a practice he always looks forward to, as it symbolizes our growth and the great talent that joins our mission. It didn’t feel right for this message to come from anyone other than the two of us. Send an email to all employees instead of trickling notifications through managers. Within the next hour, all members of the global team will receive an email from the two of us explaining how this change will affect them. If you’re leaving today, we’ll send this update to both your personal address and your Cloudflare address so you can receive the information right away. It’s important to us that we treat departing team members right and in a way that goes beyond what we’ve seen at other companies. We believe that acting with empathy is not about avoiding difficult decisions, but rather how we treat people when those decisions are made. If we expect our teams to be world class, we have a mutual obligation to be world class in the way we treat them. We combine the directness of these measures with: retirement package Industry leading. The package for retiring employees includes an amount equal to their full base salary through the end of 2026. Health insurance varies around the world, but if you live in the United States, we will continue to provide support through the end of the year. We are also granting stock to retiring team members until August 15th, so they can continue to receive their stock after their retirement date. And if the retiring team member hasn’t reached the one-year limit, he plans to forfeit them and vest prorated shares through August. We asked the team to do this just once, even though it might be difficult today. We don’t want to repeat the same thing in the near future. By taking decisive action now, we will provide immediate clarity for players who are leaving and protect the stability of the teams that remain. We are making these changes now because repeatedly making small cuts or dragging out a reorganization over multiple quarters would create long-term emotional stress for our employees and slow our ability to build. That’s the right thing to do. That’s honest. And it reflects the values of the company we continue to build upon. Cloudflare started as a digitally native company built on the cloud. This has allowed us to catch up and overtake companies that had years or even decades of head start but were lagging behind due to outdated systems and processes. Now that we are leaders, we can no longer rest on the workflows and organizational structures that worked yesterday. We are confident that our reimagined organization will be even faster and more innovative as we continue to build our future. To those who are leaving us: You have helped build the strong foundation that Cloudflare stands on today. We have the utmost respect for your work and appreciate the impact you have had. We are confident that you will land in other great places and build many future great companies, taking the unique skill sets you learned while building Cloudflare with you. Transparency is a core principle at Cloudflare, and it was important for you to hear this from us first. We’re heading to an earnings conference call at 2:00 PM PT, where we’ll talk more. We’ll also be covering today’s announcement live with our team in an all-hands meeting. the not an easy daybut it’s the right decision. Our mission to help build a better internet is more important than ever, and we have a lot of work to do.