Earlier this month, Cloudflare announced it would cut approximately 20% of its workforce as part of a restructuring to adapt to the rapid adoption of artificial intelligence (AI) tools. The internet infrastructure and cybersecurity company is laying off over 1,100 jobs globally. The announcement came shortly after Cloudflare reported first-quarter earnings that exceeded Wall Street expectations.
CEO and Co-Founder Address Employees
In a memo to employees, Cloudflare CEO Matthew Prince and co-founder Michelle Zatlyn stated that the company is reimagining every team and function to operate in what they described as an "agentic AI era." They emphasized the importance of delivering the layoff message directly, rather than through managers. The memo revealed that Cloudflare's internal use of AI has increased more than sixfold over the past three months, prompting significant changes in team operations. Prince noted that he personally sends every offer letter extended by the company, a practice he views as symbolic of Cloudflare's growth and talent acquisition.
CEO's Op-Ed in The Wall Street Journal
Days after the layoff memo, Prince published an op-ed in The Wall Street Journal titled "How I Choose Which Cloudflare Employees to Replace With AI." He explained that the layoffs were not due to financial struggles, as Cloudflare posted record revenue growth, strong free cash flow, and an unprecedented number of new customers. Instead, the changes are driven by the need to adapt to a shifting business landscape.
Prince referenced Peter Drucker's 1954 book The Practice of Management to categorize employees into three roles: builders (create products), sellers (sell products), and measurers (handle internal audit, finance, compliance, middle management, etc.). He argued that AI is not threatening builders or sellers, but is replacing measurers. AI systems can now measure organizational performance with objective detail and precision previously impossible for human employees.
Impact of AI on Measurers
Prince stated that the vast majority of laid-off employees were measurers. Cloudflare cut middle managers, consolidated operations into a single group using AI for expertise, and significantly reduced the marketing team, which he described as "teeming with measurers." He emphasized that the layoffs were not about reducing headcount; the company has a record number of open positions and expects employee numbers to grow. With fewer measurers, Cloudflare can invest more in builders and sellers, which drive growth.
Prince highlighted that Cloudflare received nearly one million applicants for 1,111 paid internships this summer. The hired interns are "AI-native" and primarily builders or sellers, with most expected to receive full-time offers. He concluded that AI will not lead to widespread unemployment but will allow businesses to focus on building and selling, creating value and capturing opportunities.
