Cloudflare's first mass layoff in 16 years came at peak earnings
Revenue up 34% year-on-year, yet 20% of staff gone. Prince says AI use at the company grew 600% in three months. The productivity story is now a headcount story.
The consensus claim is that AI drives productivity. Cloudflare CEO Matthew Prince is now using that claim to explain the first mass layoff in the company's 16-year history — 1,100 people, nearly 20% of a workforce that stood at roughly 5,500 before the cuts.
The counter sits right in the earnings numbers. Q1 2026 revenue hit $639.8M, up 34% year-on-year. This was not a struggling company trimming costs. Prince said internal AI use grew 600% in three months, and that some employees became "two, 10, even 100 times more productive." CFO Thomas Seifert confirmed the cuts touched nearly every department except direct sales.
The gap worth naming: strong revenue growth and AI-driven productivity gains used to mean you hired more people to capture more growth. Here they became the justification for cutting a fifth of the company.
Prince says Cloudflare may grow headcount again by 2027. The productivity story and the headcount story are now the same story.