May 7 (Reuters) - Cloudflare said on Thursday it would cut about 20% of its workforce as the company restructures operations around the rapid adoption of artificial intelligence tools, and forecast second-quarter revenue slightly below Wall Street expectations.
The internet infrastructure and cybersecurity company plans to cut more than 1,100 jobs globally. It had 5,156 full-time employees at the end of 2025, and expects charges between $140 million and $150 million associated with the job cuts in the second quarter.
Cloudflare expects second-quarter revenue of $664 million to $665 million, just under analysts' estimate of $665.3 million, according to LSEG-compiled data. Adjusted earnings are projected at 27 cents per share, in line with expectations.
Shares of the San Francisco-based company dropped roughly 19% in extended trading despite stronger-than-expected first-quarter results. 'AGENTIC AI-FIRST OPERATING MODEL'
Cloudflare CEO Matthew Prince and co-founder Michelle Zatlyn said in a message to employees that the company was reimagining every team and function to operate in what they described as an agentic AI era.
Cloudflare said the job cuts reflect a redesign of internal processes and roles, rather than a response to employee performance or short-term cost pressures.
The company added that its own use of AI has increased more than sixfold over the past three months, prompting major changes in how teams operate.
In the first quarter, Cloudflare reported revenue of $639.8 million, beating analysts' estimate of $621.9 million. Adjusted profit came in at 25 cents per share, above expectations of 23 cents per share.
Shares of Cloudflare have risen 30.3% so far this year.
IMPACT OF AI-DRIVEN AUTOMATION
The announcement comes as concerns grow among investors and economists that AI-driven automation could disrupt industries and accelerate job losses in sectors most vulnerable to automation.
In a similar move, payments firm Block said in February that it would cut more than 4,000 jobs, nearly half its workforce, as part of an overhaul to embed AI across its operations.
Earlier this year, Goldman Sachs economists said AI was responsible for 5,000 to 10,000 monthly net job losses in 2025 in the most exposed U.S. industries.
(Reporting by Anhata Rooprai in Bengaluru and Mrinmay Dey in Mexico City; Editing by Sahal Muhammed and Sherry Jacob-Phillips)
