AI in action · Markets
Cloudflare Grew 39% Six Months After Cutting 20% of Staff
Cloudflare's revenue grew 39% to $782.5 million in the third quarter, its fastest pace in nearly four years, six months after it cut about 1,100 jobs to become "agentic AI-first".
In May, Cloudflare said it would cut more than 1,100 jobs, about a fifth of its workforce, as it reorganised around what it called an agentic AI-first operating model, and its shares fell sharply after hours. On Thursday, November 5, it reported the quarter that followed. Revenue rose 39% to $782.5 million, from $562 million a year earlier, which chief executive Matthew Prince called the company's fastest growth in nearly four years. The shares rose about 14.6% in extended trading, according to StockTitan, after a day in which the Nasdaq fell 5.5%.
Growth came from the products that sit closest to AI workloads. On the earnings call, management attributed it to rapid growth in the Workers developer platform and in agentic workloads running across Cloudflare's network, and said it booked its first revenue from a new set of products it calls Act 4. Prince described the company as having "built the development platform for the AI-powered Internet". Current remaining performance obligations, contracted revenue due within a year, rose 37%.
The cost side is less tidy than the headline. Non-GAAP operating income was $137.1 million, 17.5% of revenue, but on a GAAP basis the company lost $67.9 million from operations, and restructuring charges reached $161.7 million over the first nine months, close to the $140 million to $150 million it had estimated in May. Gross margin fell to 72.4% on an adjusted basis from 75.3% a year earlier, and free cash flow was $82.1 million, or 10% of revenue.
The guidance assumes the acceleration holds. Cloudflare expects fourth-quarter revenue of $845 million to $846 million and full-year revenue of about $2.96 billion, with adjusted earnings of $1.35 a share. At the midpoint, the fourth quarter would be about 8% above the third.
The case is still a single company over two quarters, and Cloudflare's growth depends on traffic and developer adoption more than on headcount. But it is one of the first public tests of a question many boards are asking: whether a company can cut a large share of staff in the name of AI and grow faster afterwards. So far the answer from Cloudflare is yes on revenue and not yet on margins, which is the half investors will check again in February.
Sources: Cloudflare Q3 2026 results, Form 8-K exhibit 99.1 (SEC EDGAR); Bloomberg — Cloudflare to Cut One-Fifth of Workers in Move to AI-First Model (May 7, 2026); Capacity — Cloudflare cuts jobs; StockTitan — The stock market today, November 5, 2026 (after-hours moves)