In May 2026, Cloudflare completed its first large-scale layoff since its founding 16 years ago, cutting 1,100 jobs, or one-fifth of its total workforce. CEO Matthew Prince subsequently published an op-ed titled "How I Choose Which Cloudflare Employees to Replace With AI" in The Wall Street Journal, explaining his rationale for the layoffs. This makes Cloudflare the first public company in U.S. business history to cut more than 20% of its workforce while maintaining over 30% revenue growth, and Prince says this type of move will become industry standard over the next year.


### Layoff Rationale: Drucker's 1954 Three-Way Job Classification

Prince cites Peter Drucker's 1954 book *The Practice of Management*, which divides corporate roles into three categories:

1. **Builders**: Responsible for building products, such as engineers. Prince says if an engineer can boost their productivity 10x with AI, he would hire as many of these people as possible

2. **Sellers**: Responsible for engaging with clients and closing deals. Prince notes that budget control ultimately lies with people, who prefer to work with others who understand their needs, so these roles are safe

3. **Measurers**: Cover all remaining work, including finance, auditing, legal, compliance, middle management, operations, and marketing. Most of this work consists of structured, repeatable content, making it the core application scenario for AI

### Internal Implementation Cases

Cloudflare has already applied AI to multiple "measurer" roles:

- Internal auditing has shifted from sampling a small number of risk points quarterly to continuous, full-business, around-the-clock auditing

- Financial closing has gotten faster, and error rates have dropped

- Middle management positions have been drastically cut: AI allows senior managers to oversee more direct reports, eliminating the need for an intermediate information layer

### Out With the Old, In With the New: 1,100 Layoffs, 1,111 New Intern Hires

The scale of layoffs is nearly matched by the number of new internships the company is offering. Cloudflare received nearly 1 million internship applications this year, for an acceptance rate of just 0.1%. Prince calls this group of interns "AI-native"; all are hired for builder or seller roles, and most will be converted to full-time positions.

### Market Reaction

The layoff announcement was released alongside quarterly financial results, which showed a $62 million loss for the quarter, with severance and restructuring costs totaling between $140 million and $150 million. Although Prince claimed the layoffs were not done to cut costs, investors did not buy the explanation, and the stock dropped more than 20% immediately after the news broke.

### Core Discussion Among Netizens

1. Some netizens point out: Senior employees are too costly. New graduates who can use ChatGPT cost only one-tenth the salary of long-tenured staff and are easier to manage. Blaming AI just makes the layoffs sound more tech-forward

2. Some netizens shared a self-check framework for ordinary workers to assess job risk: Does your daily work involve creating new content, closing deals, or does it focus on organizing, counting, approving, and reporting? If it's the latter, you should shift to one of the first two role categories as soon as possible

3. A netizen going by Markus added: AI substitutability is not based on how technically demanding the job is — it depends on whether the job follows a standard operating procedure (SOP). Any job that can be written out as a one-page SOP will eventually be taken over by AI

4. Some netizens brought up industry precedent: Similar moves by tech companies in 2024–2025 resulted in short-term productivity gains but lower innovation quality over the medium to long term, because tacit knowledge cannot be fully transmitted in text, and AI takes time to internalize it

5. Some netizens used data for irony: Prince says layoffs aren't for saving money (with $140 million in severance), they're for evolution (with a $62 million quarterly loss), and we should believe in AI's future (with a 20%+ stock drop), and investors said nothing

6. Some netizens mentioned a domestic Chinese case: Li Xiang of Li Auto did a similar round of cuts, and ended up cutting into the company's core — experienced senior employees actually get more done with AI

7. Some netizens pointed out the job market context: 1 million internship applications for a 0.1% acceptance rate — is it any wonder CEOs who praise AI at graduation ceremonies get booed by students

8. Some netizens brought up a technical variable: Current token costs are rising, and companies still need human labor to deploy open-source models, so builder roles won't face large-scale cuts for the time being

### Links to Original Op-ed

[Wall Street Journal Op-ed](https://www.wsj.com/opinion/how-i-choose-which-cloudflare-employees-to-replace-with-ai-40a197e5) | [Apple News Version](https://apple.news/A9PjCwSfHTXiMDSF-Hj27_Q)