Cloudflare stock plunges 23% after AI-related layoffs

Cloudflare Inc. (NYSE: NET) shares fell 23% on the trading day after the company announced plans to reduce staff tied to AI-driven automation. The announcement came during regular market hours and triggered heavy selling as investors adjusted near-term expectations for growth and costs.

Cloudflare said the reductions are driven by changes in how it is using artificial intelligence to automate certain tasks and reallocate resources. Company communications described the cuts as aligning headcount with operating models that incorporate AI tools.

The firm did not disclose the number of roles affected or which teams will be targeted. Employees received notices through internal communications. Cloudflare indicated affected staff will receive severance and support according to company policy, and management plans to provide more details as it finalizes the reorganization.

Cloudflare operates a global network that provides content delivery, DDoS mitigation, web application firewall and domain name system services. Founded in 2009, the company serves enterprise and smaller business customers and has invested in engineering to expand its platform.

Analysts note technology companies are increasingly integrating machine learning and large language models into operations, which can change staffing requirements across engineering, operations and support functions. Cloudflare plans to reallocate resources to areas where AI can increase efficiency and support product development.

The stock decline reflected investor sensitivity to workforce announcements tied to technology changes. Cloudflare said it will provide further updates to shareholders and customers as it implements the organizational changes.