-- Cloudflare's (NET) surprise workforce reduction signals a "position of strength to truly change the operating model to be AI-first," with the company cutting deeply into its middle layers while preserving core sales roles, RBC Capital Markets said Thursday in a report.
The 1,100-employee reduction, or 20% of staff, is broad-based across geographies and functions, though quota-carrying and customer-facing roles were largely spared, giving RBC confidence in Cloudflare's growth outlook, according to the report.
Cloudflare is rebuilding its operating model around AI and is adding quota-carrying roles, RBC said. Internal AI usage surged sevenfold, driving major productivity gains and enabling the company to run with fewer support and middle-management positions, the report said.
RBC maintained its outperform rating on Cloudflare stock and its $240 price target, citing the company's "durable growth with AI efficiencies" and its strategic relevance in the emerging agentic-AI era.
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