On May 7, 2026, Cloudflare announced two things in the same press cycle. The first was that the company had posted $639.8 million in Q1 revenue — up 34% year-over-year, the highest quarter in its sixteen-year history. The second was that it was firing roughly 1,100 people, about 20% of the workforce, in the first mass layoff the company has ever done.
Read those two sentences again. Take your time. There is nothing to misunderstand. The company is not in trouble. The company is doing better than it has ever done. And the company is firing one out of every five of the people who got it there.
When an analyst on the earnings call asked the obvious question — why cut so deeply after a record quarter — CEO Matthew Prince gave an answer that should be carved into the side of every B-school in America so the next generation of executives can study what telling on yourself sounds like.
“Just because you’re fit doesn’t mean you can’t get fitter.”
That is the line. That is the entire ideology of the current AI-flavored layoff cycle in one breath. There is no number good enough. There is no fit healthy enough. The optimization is permanent. The humans are the friction.
Let’s deal with the screwdriver line first, because it’s the one that’s been making the rounds, and it deserves to keep making the rounds.
Explaining what changed inside Cloudflare last November, Prince said this: “At that point, across our teams, we began to see massive productivity gains, team members that were two, ten, even one hundred times more productive than they had been before. It was like going from a manual to an electric screwdriver.”
If you are a defender of Matthew Prince, you will tell me the screwdriver was the tool, not the person. The AI was the upgrade, not the engineer. He didn’t call anyone a screwdriver.
Sure. Fine. Let’s take the most charitable possible reading. In that reading, the engineer is the hand that holds the screwdriver. The AI is the screwdriver itself. The hand stays. The tool gets upgraded.
Now ask yourself: if the tool just got 100x better, what do you do with 99% of the hands?
You fire them. Which is exactly what Cloudflare did. The metaphor is the layoff. The layoff is the metaphor. The only thing Prince didn’t say out loud is that the manual screwdrivers — the ones the company doesn’t need anymore — have names, and mortgages, and kids in school, and equity that was going to vest next month.
He said most of the rest of it, though. Read the email he sent.
Cloudflare’s own statement, signed by Prince and president Michelle Zatlyn, includes this sentence: “Today’s actions are not a cost-cutting exercise or an assessment of individuals’ performance; they are about Cloudflare defining how a world-class, high-growth company operates and creates value in the agentic AI era.”
Let’s interrogate that sentence, because it is doing a lot of work.
If it is not a cost-cutting exercise, then the company believes it can afford these people. That is the only thing “not a cost-cutting exercise” can mean. The company has the money. The company chose not to spend it on these humans. This is not “we wish we could keep you but the books don’t allow it.” This is “we could keep you, and we are choosing not to.”
That is meaningfully worse than a cost-cutting layoff. A cost-cutting layoff is a tragedy. This is an aesthetic. Prince and Zatlyn explicitly want you to know that this is about how a “world-class, high-growth company operates.” The 1,100 people are not too expensive. They are insufficiently world-class for the current vibe.
If it is not “an assessment of individuals’ performance,” then these are not the underperformers either. The company is explicitly telling you it is not firing the worst twenty percent. It is firing twenty percent selected by criteria the company won’t name out loud, but which they are willing to tell you make Cloudflare more “world-class.” If you’re still employed at Cloudflare this morning, congratulations — your continued employment is officially not a vote of confidence in your work. It’s a vote of confidence in whatever sorting algorithm just spared you.
I keep reading the email back and the second sentence is the giveaway. Not the screwdriver. This one. They want credit for the directness. They want credit for the severance. They want credit for treating people “right” while doing the thing that everyone, including them, can see is wrong. The severance is generous — full base pay through end of 2026, extended healthcare, accelerated vesting. Good. That is the floor of decency for what they are doing, not the ceiling of grace.
Look at who got cut and who didn’t. This part is the proof.
Cloudflare’s CFO Thomas Seifert said on the call that the cuts hit “all teams and geographies” — with one exception. Salespeople carrying revenue quotas were spared.
Read that again. Engineering — cut. Customer support — cut. HR — cut. Marketing — cut. Recruiting — cut. The people who write the software, the people who keep the software running for customers, the people who hire the next generation of engineers, the people who tell the world what Cloudflare does — all on the table. The people who close deals — protected.
Now Prince’s own data: he claimed 97% of R&D uses AI coding tools. So if AI tools made R&D 100x more productive, you’d expect R&D to be the safest place in the building. It isn’t. R&D got cut. Sales — which he did not claim is using AI agents to close enterprise contracts — kept every quota-carrying head.
Strip the language off and you get this: Cloudflare did not AI-automate the work it considers valuable. It AI-automated the work it considers cost. The function that brings money in is sacred. The functions that make the product, support the product, and staff the company are screwdrivers. Manual ones.
If you are a software engineer reading this and you have spent the last two years using Cursor and Copilot and Claude Code to ship faster because your CTO told you that’s how you stay employable — Matthew Prince just told you the truth about that bargain. You used the tools. You got more productive. Then 100x productive engineers became 100x reasons to need fewer engineers. The reward for adoption is elimination.
The salesperson who can’t quote a regex is still there. Funny how that works.
About 2027.
Prince closed his bad news with good news, in the way you do. “I would guess that in 2027 we’ll have more employees than we did at any point in 2026.” Translation: don’t worry about the headcount line on your screen, it’ll bounce back.
This is the line that gets quoted in soft-touch coverage as if it makes the layoff a temporary blip. It does not. It is, structurally, an admission that the company is going to refill these seats — just with different people, doing different work, almost certainly at different (read: lower) salary bands for the equivalent function once it’s “AI-augmented.”
The 1,100 people getting fired today are not getting their jobs back in 2027. They are not getting Cloudflare’s 2027 jobs. Those 2027 jobs are reserved for whoever the company decides fits the “agentic AI era” mold — likely younger, almost certainly cheaper, and definitely not the people who had the gall to be a senior support engineer making $180k before AI made the function “leverageable.” This is wage compression with a hiring chart laid over the top of it to confuse the press.
The 2027 line is not comfort. It’s the receipt.
Now, the legality question, because someone will raise it and it’s worth getting it right.
The layoffs are legal. Almost certainly entirely legal. At-will employment is the law in 49 of 50 states. The covenant of good faith and fair dealing exists in a handful of states but it is narrow — it stops an employer from firing you to dodge paying earned commissions, not from restructuring around a stated strategic shift. The WARN Act requires 60 days notice for mass layoffs at companies above a certain size, and Cloudflare’s severance — full base pay through end of 2026, roughly eight months past the announcement — blows past anything WARN would require. There is no California-specific statute that prevents this. There is no federal statute that prevents this. Montana has a wrongful-discharge law that requires “good cause” for termination after a probationary period, but Cloudflare is headquartered in San Francisco and the cuts are global.
This is legal. That is the whole problem.
What the legality means is that the only mechanism this country has for telling executives that a record-revenue quarter followed by a 20% layoff is grotesque — the only one — is shame. There is no court. There is no regulator. There is no shareholder lawsuit, because the shareholders mostly approve. The shareholders are part of why he did it.
The mechanism is shame. Which is to say: writing it down. Naming it. Refusing to let the screwdriver line become a fun anecdote at a conference next year.
Cloudflare is not alone. That’s the part that should scare you most.
According to layoffs.fyi, the tech sector cut over 102,000 jobs in the first four months of 2026, and AI was named as the primary driver in two consecutive months. Meta laid off thousands while pouring billions into AI infrastructure. Microsoft did the same. Amazon did the same. Block did the same. Each company posted record or near-record revenue at the same time. Each one cited AI productivity gains. Each one packaged the message with care: “this is not cost-cutting,” “we’re investing in the future,” “we will hire more people in the long run.”
The script is now identical enough that you could mail-merge it. The CEO insists this is structural, not financial. The CFO confirms that revenue is fine, in fact better than fine. The blog post talks about the “AI era” or the “agentic AI era” or the “AI-first operating model.” The layoff is roughly 5 to 20 percent of headcount. Sales is protected. R&D is exposed. Severance is generous-enough to soften the press. Some executive says “this was the hardest decision of my career” and personally signs every layoff letter as if the personal signature is a service to the recipient instead of a brand-management exercise for the signer.
The pattern matters because it tells you what’s actually going on. This is not a one-time correction. This is the new operating model. Pay one cohort to leave, hire a cheaper cohort to replace them, point at the productivity numbers, post the buyback announcement next quarter. AI is the rhetorical cover for what is, in plain English, a coordinated wage suppression event across the upper end of the white-collar labor market. The technology is real. The productivity gains are real. The choice to convert those gains into firings rather than into shorter weeks, larger teams, lower prices, or higher wages — that’s the part that’s discretionary. That’s the part the executives are responsible for. That’s the part history is going to remember.
There is a version of this story where AI productivity gains expand the pie. Where Cloudflare keeps its 5,500 people, ships twice as much product, builds three new business lines, and lets a generation of engineers do the most ambitious work of their careers because they have leverage they didn’t have last year. The company has the money. The company has the talent. The company has the AI tools. That version of the story is available, today, at zero incremental cost.
Matthew Prince looked at that version of the story and chose the other one. He chose the one where the productivity gain becomes a press release about being “world-class” and 1,100 people get electric-screwdrivered out of the building so the stock can — well, the stock dropped 23%, but presumably he thinks the math works out over time.
“Just because you’re fit doesn’t mean you can’t get fitter.”
A fit person who hits the gym five days a week and adds a sixth day is getting fitter. A fit person who decides their right arm is no longer pulling its weight and amputates it is not getting fitter. They are getting smaller. They are calling it fitness because they don’t like the word for what it actually is.
Cloudflare’s right arm just walked out the door with eight months of severance and a story about being a manual screwdriver. The remaining body is going to be told, repeatedly, in all-hands meetings, that this was about excellence. The 2027 hires will be told they are joining a company built for the agentic AI era.
The 1,100 will know better. They were there when the screwdriver was electric. They were the ones holding it. And the man who fired them will keep getting on calls and saying things like “just because you’re fit doesn’t mean you can’t get fitter” because nobody — no regulator, no court, no shareholder, no board — has any incentive to make him stop saying it.
So that leaves us. Write it down. Name it. Refuse the language. The next time a CEO tells you a record-revenue layoff is about “defining how a world-class, high-growth company operates,” ask them, on the record, whether they’re talking about the company or about themselves. Ask them what gym they go to. Ask them whether they think their right arm is pulling its weight.
And remember the screwdriver line. Not because it was the worst thing he said. Because it was the truest. He told you exactly how he thinks about the people who built his company. He even told you which kind of screwdriver they are.
Gal Ratner is Chief Architect at Prana Entertainment LLC and writes about software, systems, and the tech industry at galratner.com.