Cloudflare (NET) Stock: Falls as AI Layoffs Overshadow Strong Q1 Earnings

TLDR

• Cloudflare (NET) stock sinks 24.31% after AI-led layoffs hit sentiment.
• Cloudflare beats Q1 estimates, but 20% job cuts pressure NET stock.
• NET stock falls as Cloudflare links 1,100 layoffs to AI restructuring.
• Cloudflare raises 2026 outlook, but softer Q2 guidance weighs on shares.
• Strong Q1 revenue fails to lift NET stock after major AI-focused layoffs.

Cloudflare (NET) stock dropped sharply after the company announced major job cuts despite stronger first-quarter results. The stock traded at $194.36, down 24.31%, after a steep one-day selloff. The fall reflected market concern over AI-led restructuring and softer near-term revenue guidance.

Cloudflare, Inc., NET

Cloudflare Q1 Earnings Beat Wall Street Estimates

Cloudflare reported first-quarter revenue of $639.8 million, rising 34% from the same period last year. The figure came above Wall Street estimates of about $620.83 million. Additionally, adjusted earnings reached $0.25 per share, beating expectations of $0.23 per share.

The company also improved profitability during the quarter. Adjusted operating income rose to $73.1 million, equal to 11.4% of revenue. Furthermore, free cash flow reached $84.1 million, representing 13% of total revenue.

Cloudflare said demand remained strong across its connectivity cloud products. However, revenue growth failed to accelerate for the first time in four quarters. That slowdown added pressure despite the company’s earnings beat.

AI Layoffs Drive Market Selloff

Cloudflare announced plans to cut more than 1,100 jobs worldwide. The reduction equals about 20% of its global workforce. The company linked the move to its shift toward an agentic AI-first operating model.

Management said internal AI tool usage jumped more than 600% over the past three months. Cloudflare also said thousands of AI agent workflows now support daily operations. However, the large workforce reduction triggered a negative market reaction.

The company expects restructuring charges between $140 million and $150 million. Most of those costs should appear in the second quarter. Meanwhile, Cloudflare said account executives will remain outside the layoff plan.

Softer Guidance Weighs on Cloudflare Stock

Cloudflare issued second-quarter revenue guidance between $664 million and $665 million. The midpoint of $664.5 million came slightly below analyst estimates of $666.1 million. Consequently, the outlook raised concerns about near-term growth momentum.

Still, Cloudflare raised its full-year earnings forecast. The company now expects adjusted earnings of $1.19 to $1.20 per share. That range stands above Wall Street expectations of about $1.13 per share.

Full-year revenue guidance also moved higher. Cloudflare expects 2026 revenue between $2.805 billion and $2.813 billion. Even so, the sharp stock decline showed that the layoff news outweighed the stronger annual outlook.

Cloudflare’s restructuring also fits a broader technology trend. Major companies have reduced staff while increasing spending on automation and AI infrastructure. Therefore, Cloudflare’s results highlight both the growth promise and workforce disruption tied to AI adoption.

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