Cybersecurity and cloud services firm Cloudflare has announced layoffs affecting more than 1,100 employees globally, saying a sharp rise in the company’s internal use of artificial intelligence has forced a major restructuring of its workforce.
The company disclosed the decision shortly after reporting quarterly earnings that beat analyst expectations. However, despite the strong results, Cloudflare shares reportedly fell more than 14% in after-hours trading.
According to a company-wide memo cited in reports, Cloudflare said its internal AI usage had surged by more than 600% within just three months, with employees across departments increasingly relying on AI agents for daily operations.
Also Read | Google launches AI Health Coach in India as Fitbit app gets major makeover
The company said the layoffs were part of a broader shift toward what its founders described as the “agentic AI era”.
AI-driven restructuring reshapes company operations
In the memo addressed directly to employees, Cloudflare’s founders said thousands of AI agent sessions are now being used daily across engineering, finance, HR and marketing teams.
Cloudflare believes that retaining its traditional organisational structure would lead to decreased decision-making speed and efficiency due to further integration with AI technology.
Cloudflare stated that the layoffs had nothing to do with poor performance or financial difficulties faced by employees but were necessary because of future organisational changes due to AI.
It also decided to conduct the layoffs at once, instead of extending them for several months in order to prevent any additional anxiety on the part of the staff.
Severance support announced for affected staff
According to the statement issued by Cloudflare, its US workers laid off will be provided with salary payments as well as health insurance cover for the entire year of 2026.
Furthermore, the company mentioned that vesting of equities will continue until August 15, but employees with no equity cliff fulfillment will be exempted from the condition.
Notably, the memo bearing this information was allegedly signed by the co-founders of the company, who said that they want their workers to know about it directly from them instead of through the managerial hierarchy.
This move of Cloudflare places it among the increasing list of companies in the technology industry taking advantage of the efficiencies brought about by AI technology to rationalise their workforce. It also shows the worries of the technology sector across the world regarding the effects of AI technology on white-collar jobs.
Also Read | Think deleted files are gone forever? Your data may still be recoverable
Bigger debate over AI and jobs returns to spotlight
This will only serve to fuel the debate regarding whether AI is a tool to improve productivity among workers or whether AI is being used to replace certain parts of the workforce. A number of big tech companies have been increasing their investment in AI while reducing their workforce during the past year.
What is special about Cloudflare's strategy is that the company made the layoffs directly proportional to the extent of its AI implementation within the organization.
It can be predicted that industry watchers will keep an eye on whether other tech companies adopt such a strategy.
