Cloudflare is currently experiencing an odd atmosphere. The kind you get when a business reports the best quarter of its existence, but its stock still plummets. Following one of the biggest single-day declines the stock has ever experienced, shares of NET were trading close to $191 on Tuesday afternoon. It was close to $260 a few weeks ago. One story is revealed by the numbers. Another is being told by the market.
The contradiction is difficult to ignore. Revenue reached $639.8 million, the highest amount in the company’s sixteen-year history, up 34% year over year. The number of large customers—those who spend over $100,000 annually—grew by 38%. The growth rate of deals valued at $1 million or more was the fastest since 2024. This quarter should have seen a rise in the stock rather than a 24% decline, according to practically all conventional measures.
| Company Information | Details |
|---|---|
| Company Name | Cloudflare, Inc. |
| Ticker Symbol | NYSE: NET |
| Current Price (May 13, 2026) | $191.52 USD |
| Headquarters | San Francisco, California |
| CEO & Co-founder | Matthew Prince |
| CFO | Thomas Seifert |
| Founded | 2009 |
| Market Capitalization | $67.51 Billion |
| 52-Week Range | $150.45 – $260.00 |
| Q1 2026 Revenue | $639.8 Million (+34% YoY) |
| Employees (pre-layoff) | ~5,500 |
| Recent Announcement | ~1,100 job cuts (~20% of workforce) |
| Sector | Internet Infrastructure, Cybersecurity, Edge Computing |
Then the other announcement was made. A fifth of the workforce, or about 1,100 workers, would be let go. During the earnings call, Matthew Prince carefully described it as a structural reorganization rather than a cost-cutting measure. He claimed that the business was reorganizing itself around what he repeatedly referred to as an “agentic AI-first operating model.” In just three months, internal AI use had increased by over 600%. AI coding tools developed on Cloudflare’s own Workers platform were already being used by 97% of R&D employees.
Investors might have heard something different from what Prince intended. The implication is reciprocated when a CEO claims that his own technology has eliminated the need for a fifth of his workforce. What will happen to the workforces of Cloudflare’s clients, who are the ones paying those seven-figure contracts, if AI can do that to Cloudflare’s workforce? The market seems to still be figuring out the solution.
It is helpful to walk through the larger context. There has never been a mass layoff at Cloudflare. Not during the 2022 tech correction, not during the pandemic, and not during any of the cycles that battered its competitors. The business has been one of those exceptional growth stories that has continued to hire while others were pulling back. Prince’s statement, “we’ve never done something like this in Cloudflare’s history,” carried a weight that the spreadsheets failed to convey.
Underneath, the financials still reveal an impressive tale. The gross margins remained at 72.8%. Free cash flow increased significantly from the previous year to $84.1 million. The remaining performance obligations exceeded $2.5 billion, effectively contracting future revenue. EPS is expected to be between $1.19 and $1.20, and guidance for the entire year is between $2.805 and $2.813 billion. These are not the numbers of a troubled business. These are the figures of a business that is being repriced for reasons that are more related to belief than to execution.
In its early years, Tesla encountered a similar situation. Amazon and Salesforce did as well. There were times when investors were unsure if they were witnessing a generational winner or if they were overpaying for one. That is how the current Cloudflare controversy feels familiar. A path toward a $622 price target over five years is seen by some analysts, including TIKR’s modelers. Some are discreetly eliminating jobs because they don’t know how to value a workforce that is purposefully contracting.
Something more difficult to gauge than earnings will determine whether the stock stabilizes in the upcoming weeks. The market’s acceptance of Prince’s framing—that this is how an internet company operates in 2026—or its perception of the layoffs as the beginning of an unstoppable narrative will determine the outcome. The response feels genuinely uncertain at the moment.
