Cloudflare Inc. (NYSE:NET) reported a strong first-quarter revenue beat but simultaneously announced it will cut roughly 20% of its global workforce as the web infrastructure giant fundamentally restructures its operations around artificial intelligence (AI).
‘Agentic AI-First’ Future
Despite posting a 34% year-over-year revenue increase to $639.8 million, Cloudflare is shedding over 1,100 jobs. The company stressed that the move is not a defensive measure against macroeconomic headwinds, but rather a strategic pivot to an “agentic AI-first” operating model.
CEO Matthew Prince explained that massive internal productivity gains from AI technologies prompted the reorganization. Cloudflare’s internal use of AI tools surged 600% in just the last three months, with 97% of its engineers now actively utilizing AI coding assistants.
Not A ‘Cost-Cutting’ Exercise
“This is not a cost-cutting exercise or an assessment of the individuals’ performance,” Prince stated during the earnings call. “It is about defining how a world-class, high-growth company operates and creates value in the agentic AI era.”
Management noted that the efficiency of autonomous AI agents has fundamentally changed the nature of support roles within the company, allowing it to streamline operations while actually accelerating the hiring of quota-carrying sales representatives.
Navigating The ‘Biggest Tailwind’
This massive operational shift comes as Cloudflare positions itself at the epicenter of the AI boom, providing the vital cloud infrastructure needed to route, secure, and manage exploding volumes of AI-generated web traffic.
“AI is driving a fundamental re-platforming of the Internet and a paradigm shift in how software is created and consumed,” Prince said. “It’s shaping up to be the biggest tailwind we’ve ever seen in Cloudflare’s history.”
Investors Worried About Restructuring Charges?
Despite the strong first-quarter results and a raised full-year profit outlook, Cloudflare shares tumbled nearly 16% in overnight trading following the announcement.
Investors appeared cautious over the company’s second-quarter guidance and the anticipated $140 million to $150 million in restructuring charges tied to the layoffs.
Nevertheless, leadership remains confident that replacing legacy structures with an AI-driven backbone will make the firm structurally faster and more innovative.
How Has NET Performed In 2026?
Shares of NET have advanced by 30.25% year-to-date, while the Nasdaq Composite has advanced by 11.06% over the same period. It closed 3.30% higher on Thursday at $256.79 per share, and was down 16.27% in overnight trading.
Over the last month, NET was up 18.72%, and it was higher by 10.30% over the last six months. Benzinga’s Edge Stock Rankings indicate that NET maintains a strong price trend in the short, medium, and long terms.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Piotr Swat / Shutterstock
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