Cloudflare and Artic Wolf reduce its workforce amid AI surge

The cloud connectivity vendor Cloudflare has decided to reduce over 1,100 workers from its 5,483-person staff. As per the company, the move is aimed at aligning operations with AI-driven workflows and productivity gains. Meanwhile, security operations firm Arctic Wolf cut 250 jobs from its estimated 3,402-person workforce to redirect resources toward AI-focused initiatives.

 "This isn't a cost-cutting exercise or an assessment of individual's performance. It's about defining how a world-class, high-growth company operates and creates value in the agentic AI era," Cloudflare co-founder and CEO Matthew Prince told investors. "We believe that acting with empathy isn't about avoiding hard decisions, but rather about how you treat people when those decisions are made."

Prince noted that AI adoption inside Cloudflare has surged more than 600% in the past three months. Teams across engineering, HR, finance, and marketing are using AI agents extensively each day. The company is planning to redesign internal processes, teams, and roles around AI-assisted operations, particularly leveraging its Workers platform.

"Cloudflare started as a digitally native company built in the cloud. That allowed us to catch up to and pass companies that had a head start of years or decades but were slowed down by outdated systems and processes," Prince and COO Michelle Zatlyn wrote in an email to employees. "As we've now become the leader, we cannot rest on the workflows and organizational structures that worked yesterday."

Cloudflare CFO Thomas Seifert said customer-facing sales roles were largely spared because the company continues to prioritize growth and sees AI as a productivity enhancer rather than a complete replacement for employees. The company opted for a single large restructuring to avoid prolonged uncertainty caused by multiple rounds of layoffs.

"The roles are changing dramatically, and you've got to do something dramatic in order to make that shift and that's why this was the right time," Prince said. "In other words, we're the fittest we've ever been, but we're going to get even fitter to win the next chapter."

At Arctic Wolf, executives said the layoffs would help fund development of the company’s Superintelligence platform and Agentic SOC offerings. The restructuring reportedly affected employees across sales, product development, and marketing, including some revenue-generating positions.

"We recently made an organizational restructuring to better align the company’s structure and investments with our long term strategy," an Arctic Wolf spokesperson said. "They position Arctic Wolf to operate more efficiently, continue investing in our Superintelligence platform and Agentic SOC, and deliver strong value to customers."

Prince repeatedly described AI as a "force multiplier" that increases productivity for customer-facing and engineering employees, saying that workers who embrace AI tools are "much more productive than we’ve ever seen before." He predicted AI-driven organizational redesign will spread across industries.

"A lot of the people that have provided support behind them, those roles aren't going to be the roles that drive companies going forward," Prince said. "I think we've always lived a little bit in the future. And I think that you're going to see companies around every industry starting to realize the gains that they can get from these tools. And in the process, that's going to change companies pretty dramatically."

Cloudflare expects the restructuring-related expenses between $140 million and $150 million, including severance, benefits, and stock-based compensation costs, most of which will be recognized in the quarter ending June 30. The affected employees will receive base pay through the end of 2026, continued healthcare coverage in the U.S., accelerated equity vesting, and waived one-year equity cliffs.