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Amidst the global recession and layoffs taking place across the world in the name of cost cutting, a very shocking news has emerged. Leading American tech and internet security company Cloudflare has laid off more than 20 percent of its workforce globally, i.e. more than 1100 employees.
The surprising thing is that the company has taken this step not due to any financial crisis or loss, but just after releasing its most spectacular and historic first quarter (Q1) financial report till date. The truth behind this unprecedented decision has been revealed to the world by the company’s co-founder and CEO Matthew Prince himself through a special article written in ‘Wall Street Journal’ (WSJ).
Why layoffs even after record profits? CEO gave surprising argument
Usually, companies make layoffs when they are going through bad times, but in the case of Cloudflare, the story is completely opposite. CEO Matthew Prince candidly wrote in his article, “About two weeks ago, I laid off more than 20% of my company’s employees. I did not do this because Cloudflare was facing any financial difficulty or crisis. On the contrary, this time we have achieved record revenue growth, our free cash flow is extremely strong, and we are adding a record number of new customers around the world.”
Matthew Prince further cited American corporate history and wrote, “We have not found any other example in American business history where a publicly listed company is growing at more than 30% annually and yet has fired more than 20% of its workforce. I took this tough decision because the way business is changing rapidly and Cloudflare will also have to upgrade itself to remain number one in the future.”
Connection of Peter Drucker’s 70 years old book and AI
Matthew Prince has directly linked this layoff to Artificial Intelligence (AI) and the working patterns it is changing. He predicted that by next year ‘Agentic AI’ will become a very common thing in the corporate world. Many people are still unable to understand what kind of revolutionary change AI is bringing and which jobs are going to be most impacted by it.
To logically explain his decision, the Prince referred to the classic book ‘The Practice of Management’ published in 1954 by Peter Drucker, considered the father of modern management. In this book, Drucker divided the roles of employees within any business into three main parts:
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Builders: Those who create products or technology (e.g. engineers, developers).
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Sellers: Those who sell the product in the market (like sales and marketing team).
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Measures: Who look after work monitoring, audit, middle management, finance and legal compliance.
According to CEO Prince, AI technology is now capable of working with greater accuracy, consistency and tirelessness than ‘majors’ i.e. humans who manage and monitor. This is the reason why the biggest brunt of this retrenchment has fallen on the middle management, operations and finance departments.
Jobs of ‘builders’ and ‘sellers’ are completely safe.
Even after this retrenchment, Matthew Prince has made it clear that the jobs of ‘builders’ (engineers) and ‘sellers’ are completely safe in the company. He said that if an engineer can increase his efficiency 10 times with the help of AI, then the company would like to hire more such people.
This is why, despite large-scale layoffs, Cloudflare currently has a record number of vacant positions and the recruitment process is ongoing. Prince said that this summer season the company received approximately 1 million applications for 1,111 paid internship posts. He described the candidates selected from these as ‘AI-Native’ (expert in working with AI). According to him, AI will not eliminate jobs, but will completely change the way humans work.
Affected employees will get ‘industry leading’ severance package
Cloudflare and its COO Michelle Zeitlin have clarified that the layoffs have nothing to do with employees’ individual performance or the company’s efforts to reduce costs. This is a strategic restructuring of the company for a completely AI-driven future.
Taking responsibility, the company has announced an excellent relief package for the affected employees. All the employees affected by this retrenchment will be given a severance package till the end of 2026. Along with this, they will get enhanced healthcare benefits and their full rights on the vested equity/shares till August 15 will also be protected.
