- Cloudflare stock plummeted over 20% on Friday despite reporting Q1 earnings that beat profit expectations.
- The sharp selloff was triggered by the announcement of layoffs affecting about 20% of its global workforce as the company shifts to an AI-first model.
- While raising its full-year earnings and revenue guidance, near-term concerns over restructuring costs and softer Q2 revenue outlook spooked investors.
Shares of internet tech giant Cloudflare (NET) plunged more than 20% in a single day on Friday, cratering to as low as $194.36, despite the company posting a strong first-quarter earnings report that exceeded profit expectations. The dramatic selloff reflected acute market anxiety over the company’s new AI-driven restructuring plans and its immediate revenue forecast.
The company projected current-quarter revenue between $664 million and $665 million, slightly below Wall Street estimates but still representing 34% year-over-year growth. Consequently, its adjusted earnings of $0.25 per share beat the anticipated $0.23, while profitability metrics like adjusted operating income and free cash flow also showed solid improvement.
However, investor panic stemmed directly from Cloudflare’s newly announced plan to cut over 1,100 jobs worldwide, equating to roughly 20% of its workforce. The company linked this drastic reduction to its strategic pivot toward an agentic AI-first operating model, a move that capped a week of layoffs at other top firms including crypto exchange Coinbase (COIN).
Furthermore, the restructuring is expected to incur charges between $140 million and $150 million, with most costs hitting in the second quarter. Meanwhile, Cloudflare raised its full-year outlook, forecasting adjusted earnings of $1.19 to $1.20 per share and revenue between $2.805 billion and $2.813 billion for 2026. Even so, the near-term concerns over layoffs and costs decisively outweighed the stronger annual guidance for markets.
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