Cloudflare fires 1,100 employees due to AI use, read full memo here

Cloudflare, one of the biggest internet infrastructure companies, is laying off workers. As per the company, over 1,100 employees globally will be impacted. Cloudflare states that this decision comes at a time when it has seen AI usage increase by 600 per cent internally.

In Short

• Cloudflare to lay off 1,100 workers
• Company says it wants to prepare for agentic AI era
• Cloudflare says AI use increased by 600 per cent

Cloudflare has become the latest company to conduct mass layoffs amid the AI boom. Cloudflare CEO Matthew Prince announced on Thursday that the company was going to cut over 1,100 jobs, as it embraces the “agentic AI era.” In recent weeks, other companies that have reduced roles include the likes of Meta, Amazon, and Oracle.

The announcement was made via an internal memo sent by Prince and Cloudflare COO Michelle Zatlyn. The memo claimed that Cloudflare had become one of the “most demanding” users of AI, with the company seeing an increase of AI use by 600 per cent in the past three months alone.

What is Cloudflare?

Cloudflare is a major internet infrastructure company that essentially hosts websites online, including the likes of LinkedIn, Canva, Spotify and many more. It is believed that roughly 20 per cent of all websites run through Cloudflare.

Do note that in December last year, major internet websites went down following a Cloudflare outage.

Cloudflare is laying off workers for AI era

In the memo, Cloudflare stated that the company was not cutting jobs to save costs. Instead, it was going to restructure to prepare for the AI-driven future. As per Cloudflare, its staff across various teams are already running “thousands of AI agent sessions” each day to do their work.

Cloudflare has a global workforce of 5,156 full-time employees. The layoffs, thus impact roughly 20 per cent of its total staff.

Do note that this announcement came hours after Cloudflare reported first-quarter earnings above Wall Street expectations. The company had first-quarter revenue of $639.8 million, above analysts' estimate of $621.9 million.

Cloudflare layoffs to cost $150 million with big severance packages

As per reports, Cloudflare expects the layoffs to cost somewhere between $140 million to $150 million related to the job cuts in the second quarter. This may be due to the severance packages given to impacted employees.

In the memo, the company stated that the severance package includes the equivalent of full base pay through the end of 2026. Healthcare support will vary depending on the country, but in the US, it would continue healthcare support through the end of the year.

Other companies who have also laid off workers recently, such as Oracle, have offered similar severance packages.

You can read the full memo below:

“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 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. 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.

Today is a hard day. This decision unfortunately means saying goodbye to teammates who have contributed meaningfully to our mission and to building Cloudflare into one of the world’s most successful companies. We want to be clear that this decision is not a reflection of the individual work or talent of those leaving us. Instead, we are reimagining every internal process, team, and role across the company. Today’s actions are not a cost-cutting exercise or an assessment of individuals’ performance; they are about Cloudflare defining how a world-class, high-growth company operates and creates value in the agentic AI era.

This is a moment we need to own as founders and leaders of the company. Matthew has personally sent out every offer letter we've extended. It is a practice he has always looked forward to because it represented our growth and the incredible talent joining our mission. It didn’t feel right for this message to come from anyone other than the two of us. Rather than trickling out notices through managers, we will be sending emails to every employee.

Within the next hour, every member of our global team will receive an email from both of us clarifying how this change affects them. For those departing today, we will send this update to both their personal and Cloudflare addresses to ensure they receive the information immediately.

It’s important to us that we treat departing team members right and in a way that exceeds what we’ve seen from other companies. We believe acting with empathy isn’t about avoiding hard decisions but rather about how you treat people when those decisions are made. If we are asking our team to be world-class, we have a reciprocal obligation to be world-class in how we treat them. We are pairing the directness of these measures with severance packages that lead the industry. The packages for departing employees will include the equivalent of their full base pay through the end of 2026. Healthcare coverage is different across the globe, and if you’re in the United States, we’ll continue to provide support through the end of the year. We are also vesting equity for departing team members through August 15th, so they receive stock beyond their departure date. And, if departing team members haven’t hit their one-year cliffs, we are going to waive those and vest their pro-rated equity through August as well.

We’ve asked the team to do this only once, as hard as that may be today. We don’t want to do it again for the foreseeable future. By taking decisive action now, we provide immediate clarity to those departing and protect the stability of the team that remains. We are making these changes now because making smaller, repeated cuts or dragging a reorganization out over multiple quarters creates prolonged emotional uncertainty for employees and stalls our ability to build. It’s the right thing to do; it’s the honest thing to do; and it reflects the values of the company we are continuing to build.

Cloudflare started as a digitally native company built in the cloud. That allowed us to catch up to and pass companies that had a head start of years or decades but were slowed down by outdated systems and processes. As we’ve now become the leader, we cannot rest on the workflows and organizational structures that worked yesterday. We’re confident that our reshaped organization will be even faster and more innovative as we continue building the future.

To those departing us: you’ve helped build the strong foundation Cloudflare stands on today. We have the utmost respect for your work and gratitude for the impact you have made. We’re confident you will land at other great places and build many future great companies, bringing with you a unique set of skills learned while building Cloudflare.

Transparency is a core principle at Cloudflare, and it was important that you hear this from us first. We will be heading to our earnings conference call at 2 PM PT, when we’ll share more. We also plan to address today’s announcements live with the team at our all-hands meeting.

It’s not an easy day, but it’s the right decision. Our mission to help build a better Internet is more important now than ever, and there’s a lot of work left to be done.”

- Ends