Cloudflare Shares Plunge 24% After AI-Driven Layoffs Despite Earnings Beat

Shares of Cloudflare plunged 24% on Friday after the company announced a sweeping workforce reduction tied directly to the growing use of artificial intelligence across its operations.

The cloud infrastructure company reported first-quarter earnings that exceeded Wall Street expectations, but investors reacted sharply to news that Cloudflare would cut approximately 20% of its global workforce — impacting more than 1,100 employees.

For the quarter, Cloudflare reported earnings per share of 25 cents, above analyst expectations of 23 cents, while revenue climbed to $640 million, surpassing the $622 million consensus estimate.

Despite the stronger-than-expected financial performance, concerns surrounding the scale of the layoffs and the broader implications of AI-driven workforce disruption weighed heavily on market sentiment.

In a public blog post, CEO Matthew Prince said that advances in “agentic artificial intelligence” had fundamentally transformed how work is performed inside the company. According to Prince, AI systems are increasingly handling functions previously managed by internal support teams, human resources, and finance departments.

The announcement positions Cloudflare among a growing number of technology companies openly restructuring operations around AI automation rather than traditional workforce expansion.

The company stated that affected employees will continue receiving base pay through the end of the year, healthcare coverage through 2026, and equity vesting through August 15 as part of the separation package.

The market reaction highlights increasing investor sensitivity toward how companies are integrating AI into corporate operations. While many firms have promoted artificial intelligence as a productivity accelerator, Cloudflare’s restructuring underscores how rapidly automation is beginning to reshape white-collar employment across the technology sector.

The development comes as corporations across Silicon Valley continue accelerating investments in generative and autonomous AI systems.