Cloudflare shares slide as investors weigh AI-driven layoffs and softer growth outlook
Cloudflare’s stock fell sharply in premarket trading after the company announced plans to cut about 1,100 jobs despite reporting stronger-than-expected first-quarter results.
Cloudflare Inc. shares dropped sharply in premarket trading Friday after the cybersecurity and internet infrastructure company announced a major AI-focused restructuring plan alongside its latest earnings report.
The stock had closed Thursday at $256.79, but was quoted at $216.00 in premarket trading at 9:21 a.m. EDT, down 15.88%, according to StockAnalysis data. Reuters also reported that Cloudflare shares tumbled more than 15% before the market open as investors reacted to the company’s slower second-quarter growth forecast and restructuring plans.
Cloudflare said it plans to reduce its workforce by approximately 1,100 employees as it moves toward what it called an “agentic AI-first operating model.” The company expects the restructuring to cost between $140 million and $150 million, mostly through severance, employee benefits and related expenses.
The announcement came despite a strong first quarter. Cloudflare reported revenue of $639.8 million, up 34% year over year, while non-GAAP net income reached $94 million, or 25 cents per diluted share. The company also reported free cash flow of $84.1 million, equal to 13% of revenue.
However, investors appeared focused on the company’s outlook. Cloudflare forecast second-quarter revenue of $664 million to $665 million, slightly below Wall Street expectations of about $665.3 million, according to Reuters. The company also said adjusted earnings are expected to come in at 27 cents per share.
Cloudflare said the job cuts were not a response to employee performance or short-term cost pressure, but part of a broader redesign of how the company operates as AI becomes more deeply embedded in its business. CEO Matthew Prince said AI is creating a major shift in how software is built and consumed, and that Cloudflare is restructuring around that change.
