Cloudflare stock sinks 18% after earnings as company cuts 1,100 employees due to AI changes

A logo of Cloudflare sits outside the company's house on the opening day of the 55th annual meeting of the World Economic Forum in Davos, Switzerland, Jan. 20, 2025.

Cloudflare reported first-quarter earnings Thursday that beat analysts' expectations, but shares fell 18% in extended trading as the company announced a 20% reduction in its workforce.

Here's how the cloud company did versus LSEG estimates:

Earnings per share: 25 cents vs. 23 cents expected

25 cents vs. 23 cents expected Revenue: $640 million vs. $622 million expected

In a blog post, the company announced that it is cutting over 1,100 employees, writing that agentic artificial intelligence has "fundamentally changed" the company's work.

"This wasn't an easy decision, but it's the right decision," CEO Matthew Prince said on the earnings call, adding that there are roles at the company "that just aren't the roles that we need for the future."

The company highlighted that its use of AI has increased over 600% in the last three months as it embraces "an agentic AI-first operating model."