Cloudflare has announced a major workforce reduction affecting more than 1,100 employees globally, as the company pivots to fully embrace the agentic AI era. In a memo sent to all staff, co-founders Matthew Prince and Michelle Zatlyn explained that the decision stems from a fundamental shift in how the organization operates, with internal AI usage skyrocketing by over 600% in the last three months alone. This restructuring is not a cost-cutting measure but a strategic reimagining of roles and processes to supercharge value for customers and advance Cloudflare’s mission to help build a better Internet.
The Strategic Shift to Agentic AI
Cloudflare’s core value of transparency drove the decision to share the news directly with the global team. The company recognizes that the way work gets done has fundamentally changed. Instead of merely building and selling AI tools, Cloudflare has become its own most demanding customer—employees across engineering, HR, finance, and marketing now rely on thousands of AI agent sessions daily to complete tasks. This rapid adoption necessitates a deliberate redesign of the company’s architecture to stay competitive in the agentic AI landscape.
AI Adoption Skyrockets
The memo highlights a staggering 600% increase in Cloudflare’s internal AI usage in just three months. This data point underlines the urgency behind the restructuring: to harness AI’s full potential, the company must streamline teams and eliminate redundancies. The goal is not to cut costs but to optimize for an AI-first future, ensuring that every role and process contributes meaningfully to innovation and customer value.
A Hard but Necessary Decision
Prince and Zatlyn acknowledged the difficulty of saying goodbye to talented teammates who have been instrumental in Cloudflare’s success. They emphasized that the decision reflects no reflection on individual performance. Instead, it is about reimagining internal operations to define how a world-class, high-growth company creates value in the agentic AI era. The founders wrote, “Today’s actions are not a cost-cutting exercise… they are about Cloudflare defining how a world-class, high-growth company operates and creates value in the agentic AI era.”
Transparent Communication
In an unusual move, the founders personally delivered the news to all employees via email, rather than cascading through managers. Each departing team member received notifications at both their Cloudflare and personal email addresses to ensure immediate access. Prince, who has historically sent every offer letter personally, felt it was important to own this moment directly. The message underscores Cloudflare’s belief that transparency extends even to the hardest announcements.
Industry-Leading Severance and Empathy
Cloudflare is pairing the directness of its cuts with what it describes as an industry-leading severance package. For departing employees, the package includes:
- Full base pay equivalent through the end of 2026.
- Continued healthcare coverage for a specified period.
The company’s philosophy is clear: empathy does not mean avoiding hard decisions, but rather how you treat people when those decisions are made. By offering generous severance, Cloudflare aims to fulfill a reciprocal obligation to treat its team as world-class, even during a transition. This approach stands in contrast to many tech layoffs seen in recent years.
Cloudflare's Vision for the Future
Despite the immediate pain, Cloudflare sees this restructuring as a necessary step toward long-term growth. The company remains committed to its mission of helping build a better Internet for everyone, everywhere. By focusing on AI transformation and rethinking internal processes, Cloudflare aims to deliver even greater value to customers and maintain its position as a leader in the technology space. The message concludes with a call to action—to honor the contributions of those leaving while building a stronger, more agile company for the future.
For more context on Cloudflare’s evolving strategy, see our article on the strategic shift to agentic AI. For details on the severance approach, jump to industry-leading severance.