Cloudflare to Layoff Over 1100 Employees Amid Shift to ‘AI-First’ Model

Cloudflare CEO Matthew Prince announced on Thursday that the company will lay off over 1,100 employees. This comes as the company tries to restructure its operations in a bid to adapt to the agentic AI era.

This constitutes around 20% of the 5,165 employees that work for Cloudflare around the globe. In an internal memo which announced the layoffs, Prince and COO Michelle Zatlyn said that this was not a cost cutting measure.

The memo also detailed how AI usage in the company had grown by a whopping 600% in the last three months.

Why the Layoffs

In the memo, Cloudflare said that the company has become its own most demanding customer. Their employees are running thousands of AI agent sessions every day to get their work done. Thus, to architect their company for the agentic AI era, they have to be very intentional in their approach.

The company hopes that by taking decisive action now they can avoid taking such steps in the future. They also said that the move provides clarity to the employees who are leaving and stability to the employees who are staying.

The memo also pointed out how Cloudflare cannot rely on the workflows and organisational structures that worked yesterday and that the reshaped organization will be faster and more innovative.

What Employees Will Get

As part of the layoffs, Cloudflare has announced a generous severance package for its employees in line with industry standards. The severance packages for departing employees will include the equivalent of their full base pay through the end of 2026.

Healthcare coverage will depend upon the location of the employees but people based in the US will get coverage until the end of the year.

They are also vesting equity for departing team members through August 15, so they receive stock beyond their departure date. And, if departing team members haven’t hit their one-year cliffs, Cloudflare is going to waive those and vest their pro-rated equity through August as well.

The departing employees will also receive emails to their personal and work addresses from Prince and Zatlyn.   

Here’s What the Memo Says

“Team: We are writing to let you know directly that we’ve made the decision to reduce Cloudflare’s workforce by more than 1,100 employees globally," the memo read.

"The way we work at Cloudflare has fundamentally changed. We don’t just build and sell AI tools and platforms. We are our own most demanding customer. Cloudflare’s usage of AI has increased by more than 600% in the last three months alone," it said.

The memo further added, "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 in order to supercharge the value we deliver to our customers and to honor our mission to help build a better Internet for everyone, everywhere".

"...“We’ll share more details during our earnings call at 2 PM PT and also speak directly with the team about today’s announcements at our all-hands meeting," it added.