In the latest quarterly earnings report, Cloudflare announced that it would lay off approximately 20%, or 1,100 employees. This move makes Cloudflare another tech company to carry out large-scale layoffs while reporting revenue growth, similar to peers like Meta, Microsoft, and Amazon. Cloudflare's CEO Matthew Prince stated that the layoffs were not due to poor performance but rather because of significant efficiency gains brought by artificial intelligence technology.

Cloudflare's internet security and performance services now cover millions of websites around the world. In its quarterly report on Thursday, the company reported a revenue of $639.8 million, an increase of 34% year-over-year, setting a new record for the company's highest quarterly revenue. However, despite the surge in revenue, Cloudflare's losses also expanded, rising from $53.2 million last year to $62 million this quarter. Prince acknowledged that the company has not yet achieved sustained profitability while growing rapidly, but he emphasized that the loss as a percentage of revenue remains relatively small.

Prince pointed out in a conference call that the main reason for the layoffs was the significant increase in internal use of artificial intelligence. He revealed that since November last year, employee productivity at Cloudflare has improved significantly, with some team members' efficiency increasing two, ten, or even 100 times. He vividly compared this transformation to "switching from manual tools to power tools." Over the past three months, AI usage within Cloudflare has increased by more than 600%.

Not only are development teams using AI, but all departments within the company, including human resources, finance, and marketing, frequently use AI tools in their daily work to improve efficiency. Therefore, as employee efficiency increases, the demand for support roles has significantly decreased. Prince said that although layoffs are taking place, the company will continue to hire and invest in new employees, as employees who master these tools are more productive than ever before. He expects that by 2027, Cloudflare's workforce will exceed any time in 2026.

Before the layoffs, Cloudflare had approximately 5,500 employees. This pattern of laying off employees during periods of strong revenue growth is becoming increasingly common in the tech industry, and discussions about it are expected to continue in the future.

Key Points:   

🧑‍💻 Cloudflare announced the layoff of 1,100 people, with a layoff rate of 20%.  

📈 The company's quarterly revenue reached a historical high of $639.8 million, an increase of 34% year-over-year.  

🤖 The significant improvement in AI usage efficiency led to the decision to lay off employees.