Cloudflare has announced a cut of approximately 20% in its workforce, equating to 1,100 people. The company attributes this move to the increased use of AI, claiming that their internal teams have seen productivity gains of up to 100 times since last November.

The quarterly revenue report revealed an impressive $639.8 million, a 34% year-over-year increase and setting a new record high for the company. However, this was accompanied by a loss of $62.0 million compared with losing $53.2 million in the previous year.

Cloudflare’s co-founder and CEO, Matthew Prince, insists that the cuts are not about cost-cutting but rather aligning with their vision for how a high-growth company operates in an AI-driven era. He highlighted that 100% of the code produced is now reviewed by autonomous AI agents.

The adoption of AI has been so transformative that Prince predicts they will have more employees than ever before next year, albeit in roles that are less support-focused and more product-oriented. The pattern of deploying AI gains to justify workforce reductions during revenue growth is becoming a common narrative across the tech industry.