Cloudflare's AI Usage Surges 600%, Company Cuts 1,100 Jobs in Agentic AI Restructuring

Earnings and Restructuring

Cloudflare delivered a jarring combination in its Q1 2026 earnings: a 600% increase in AI-related usage over the past three months, paired with the announcement of 1,100 layoffs representing roughly 20% of its total workforce. CEO Matthew Prince framed the cuts as a consequence of agentic AI fundamentally reshaping how the company operates.

The Agentic AI Paradox

Cloudflare is both a primary beneficiary of the AI infrastructure buildout and a company actively deploying AI to reduce its own headcount. Prince has previously compared the company to selling picks and shovels for AI builders, but the restructuring signals that AI has started optimizing its own suppliers.

Market Reaction

Cloudflare's stock fell roughly 24% following the announcement, with investors apparently disappointed by the pace of profitability improvement relative to revenue growth. Rising infrastructure investment costs for AI-scale workloads also pressured margins.

Industry Implications

The Cloudflare announcement reinforces a pattern emerging across the technology sector: the AI wave simultaneously creates demand spikes in cloud infrastructure while enabling headcount reductions in back-office and operational roles.