Cloudflare Cuts 1,100, Arctic Wolf Axes 250 Amid AI Surge

Artificial Intelligence & Machine Learning , Next-Generation Technologies & Secure Development Cloudflare Cuts 1,100, Arctic Wolf Axes 250 Amid AI Surge Cloud Connectivity, Security Operations Providers Reportedly Chop 20%, 7% of Staff Michael Novinson (MichaelNovinson) • May 11, 2026     Credit Eligible Get Permission Two prominent cybersecurity vendors disclosed widespread layoffs last week, axing a significant percentage of their workforce. See Also: Why Every AI Decision Begins With DNS San Francisco cloud connectivity vendor Cloudflare cut more than 1,100 workers from its 5,483-person staff Thursday, the company announced, saying the layoffs will align Cloudflare's operations with artificial intelligence-driven workflows and productivity gains. Security operations firm Arctic Wolf Wednesday laid off 250 workers from its estimated staff of 3,402 to free resources for investment in AI initiatives. "This isn't a cost-cutting exercise or an assessment of individual's performance. It's about defining how a world-class, high-growth company operates and creates value in the agentic AI era," Cloudflare co-founder and CEO Matthew Prince told investors Thursday. "We believe that acting with empathy isn't about avoiding hard decisions, but rather about how you treat people when those decisions are made." Cloudflare's layoffs are the largest from a headcount perspective of any security firm since Layoffs.fyi began tracking in March 2020, surpassing the 950-person layoff OneTrust carried out in June 2022. Cloudflare stock is down nearly 25% to $194.17 per share since announcing the 20% layoff after the market closed Thursday. This is the lowest the company's stock has traded since April 15 of this year. Prince said internal AI adoption has grown rapidly at Cloudflare, with usage increasing by more than 600% in three months and employees across engineering, HR, finance and marketing using thousands of AI agent sessions daily. Cloudflare intends to redesign "every internal process, team and role" around AI-assisted operations and automation, he said, particularly through the company’s Workers platform. "Cloudflare started as a digitally native company built in the cloud. That allowed us to catch up to and pass companies that had a head start of years or decades but were slowed down by outdated systems and processes," Prince and COO Michelle Zatlyn wrote in an email to employees. "As we've now become the leader, we cannot rest on the workflows and organizational structures that worked yesterday." Quota-carrying sales roles were largely protected from cuts because the company still expects growth in customer-facing sales capacity and views AI as a productivity multiplier rather than a replacement for all employees, said CFO Thomas Seifert. The restructuring is intended to avoid prolonged organizational uncertainty by making a single adjustment rather than conducting multiple rounds of layoffs over time. "The roles are changing dramatically, and you've got to do something dramatic in order to make that shift and that's why this was the right time," Prince said. "In other words, we're the fittest we've ever been, but we're going to get even fitter to win the next chapter." Executives at Arctic Wolf said their 250-person layoff will free resources for its superintelligence platform and agentic SOC offerings, reflecting spending on AI-focused products. Arctic Wolf framed the changes explicitly around operational efficiency and resource allocation. The underlying message was similar to Cloudflare's: AI initiatives are competing directly with headcount for corporate investment dollars. The layoffs reportedly affected employees in sales, product development and marketing, including some revenue-generating positions, according to The Register, which first reported the news. Arctic Wolf currently employs 3,402 people, according to IT-Harvest, meaning the layoff impacted 7.4% of the firm's workforce. Arctic Wolf over the past year has grown the size of its staff by 12.2% from 3,032 employees. "We recently made an organizational restructuring to better align the company’s structure and investments with our long term strategy," an Arctic Wolf spokesperson told ISMG. "They position Arctic Wolf to operate more efficiently, continue investing in our Superintelligence platform and Agentic SOC, and deliver strong value to customers." Why Cloudflare Believes AI-Driven Reorganization Will Spread Prince repeatedly described AI as a "force multiplier" that increases productivity for customer-facing and engineering employees, saying that workers who embrace AI tools are "much more productive than we’ve ever seen before." He predicted AI-driven organizational redesign will spread across industries. "A lot of the people that have provided support behind them, those roles aren't going to be the roles that drive companies going forward," Prince said. "I think we've always lived a little bit in the future. And I think that you're going to see companies around every industry starting to realize the gains that they can get from these tools. And in the process, that's going to change companies pretty dramatically." Cloudflare disclosed expected restructuring charges between $140 million and $150 million, including severance, employee benefits and stock-based compensation expenses, with most costs expected in the quarter ending June 30. Laid off employees will get full base pay through the end of 2026, continued healthcare support in the United States, accelerated equity vesting and waived one-year equity cliffs. "By fully embracing an agentic AI-first organizational structure and operating model as Cloudflare's revenue scales, our efficiency and productivity will scale even faster," Seifert told investors Thursday. "Unfortunately, this decision means parting ways with colleagues who have helped build the strong foundation Cloudflare stands on today."