NET Stock Tanks After Axing 1,100 Employees Amid AI Push; Lifts Full-Year Earnings Outlook

• Cloudflare expects $140 million to $150 million in charges related to layoffs.
• Charges to be realized in Q2 earnings. 
• Net also reported Q1 earnings that beat expectations and raised its full-year earnings outlook.

Cloudflare (NET) stock price tanked nearly 18% after-hours amid plans to cut more than 1,100 jobs globally as it accelerates its shift to an agentic AI-first operating model. 

NET’s CEO Matthew Prince highlighted that AI was triggering a “paradigm shift” in the software industry. “By embracing an agentic AI-first operating model, Cloudflare will be even faster and more innovative as we continue to help build a better Internet,” he said. 

Cloudflare’s co-founders, Prince and Chief Operating Officer Michelle Zatlyn, announced the cuts in an email to staff on Thursday.

“Cloudflare’s usage of AI has increased by more than 600% in the last three months alone,” read the note to employees. “That means we have to be intentional in how we architect our company for the agentic AI era in order to supercharge the value we deliver.”

The cloud architecture company said it expects to incur charges between $140 million and $150 million for the layoffs, which will be realized during the second quarter. The layoffs are expected to be completed by the end of the third quarter. 

Cloudflare joins a growing list of companies that have implemented layoffs in 2026 as AI takes the center stage globally across sectors. Oracle, Meta, PayPal, Block, Atlassian, and many more announced workforce cuts to offset the cost of AI in their financial statements. 

NET Q1 Revenue, Earnings Beats Estimates

Cloudflare on Thursday reported adjusted earnings of $0.25 per share for the quarter ending March 2026, beating expectations of $0.23 per share as per Fiscal.ai. 

Revenue rose to $639.8 million, up from $479.1 million a year prior. Analysts were expecting $620.8 million in revenue. 

NET Q2 And 2026 Guidance 

NET lifted its full-year outlook, with adjusted earnings projected between $1.19 and $1.20 per share, well above its previous stated guidance of $1.11 to $1.12 per share. 

Analysts polled by Fiscal.ai expect 2026 earnings at $1.12 per share, in line with the upgraded guidance.

For Q2, the company expects adjusted earnings of $0.27 per share on revenue between $664 million and $665 million, matching analyst expectations of $0.27 a share in adjusted earnings and $663.1 million in revenue.  

NET Retail View 

Retail sentiment on Stocktwits was ‘bullish’ amid ‘high’ message volumes. 

One user highlighted that the layoffs bring execution risk instead of instilling investor confidence. 

The stock has soared 111% over the past 12 months.

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