Cloudflare plans to cut 20% of its workforce, incurring $140M-$150M in charges, spooking investors despite revenue growth.
Cloudflare announced a 20% reduction in its workforce to accelerate its shift to an AI-first operating model, triggering a 23% drop in its stock. The company expects $140 million to $150 million in restructuring charges, including $105M-$110M in cash expenditures for severance and benefits, and $35M-$40M in non-cash expenses for stock-based compensation.
Despite reporting a 34% year-over-year revenue increase, the market reacted negatively to the high costs and uncertainty surrounding the AI transition. Cloudflare acknowledged in its 10-Q filing that the automation may not deliver expected benefits within the projected timeframe, potentially impacting operations.
The layoffs reflect broader tech-sector trends as companies realign resources toward AI-driven efficiency, though investor skepticism persists over execution risks.