Cloudflare delivered first-quarter revenue and adjusted earnings per share that outpaced Wall Street estimates, driven by growth in enterprise security and performance services. The company raised its fiscal 2026 revenue growth target, signaling confidence in sustained demand across its network and cloud offerings.

As part of its shift to an AI-first operating model, Cloudflare will reduce headcount by 1,100 employees, or about 20% of its workforce. Management described the move as a strategic realignment to streamline processes, redeploy talent into AI initiatives and enhance long-term value creation.

Despite the stronger-than-expected results and higher guidance, Cloudflare shares plunged over 8% on investor concerns about near-term margin pressure from restructuring and AI investment. Analysts caution that while cost efficiencies may emerge over time, the transition could weigh on profitability in the coming quarters.