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Cloudflare to cut about 20% of its workforce

reuters.com

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Re: Cloudflare to cut about 20% of its workforce

#71

Post by 13a07e686ca5 »

stego-tech wrote: post #55
rohitpaulk wrote: post #2

That's 2 major layoffs this week (Coinbase being the other). Is there an underlying common reason for this? And is it indeed AI-driven productivity as both companies claim?

There's multiple simultaneous narratives: the industry-wide one of slashing well-paid tech talent under the guise of AI productivity boosts, and what's actually going in at each company. Cloudflare is an outlier because the company doesn't actually make money at present; their past three annual statements show net losses in the tens to hundreds of millions of dollars. Not hemorrhaging cash per se (their cash reserves…

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Re: Cloudflare to cut about 20% of its workforce

#72

Post by stego-tech »

everfrustrated wrote: post #44

There was an recent article on X with an interesting take - it could be that companies are doing layoffs not because AI is making them more productive but because it hasn't . Their costs have gone up paying for expensive AI but haven't seen any revenue benefits to offset it. Article https://x.com/championswimmer/status/2051807284691612099

This genuinely wouldn't surprise me, and I need to go back to looking at balance sheets to see if I can sus out the validity of that narrative. As AI subsidization ends prematurely and costs skyrocket, we should expect to see those costs reflected in the operation statements of major customers.

Since I had Coinbase up for review already, I decided to peek there first for any sort of correlation. In 2023, their "Technology and Development" line item shows $1.32bn going out, and by 2025 it'd ballooned to $1.67bn. This is despite headcount actually contracting by almost a thousand people between those two statements, which would normally mean a smaller technology spend since a lot of corporate software is seat-based nowadays. This suggests that yeah, actually AI spend is creating a heavier drag on the balance sheets and it's being offset with layoffs since the "job replacement" narrative is strong. That said, I'd need to check dozens' more balance sheets to draw any sort of industry-wide conclusion.

Re: Cloudflare to cut about 20% of its workforce

#73

Post by 13a07e686ca5 »

everfrustrated wrote: post #44

There was an recent article on X with an interesting take - it could be that companies are doing layoffs not because AI is making them more productive but because it hasn't . Their costs have gone up paying for expensive AI but haven't seen any revenue benefits to offset it. Article https://x.com/championswimmer/status/2051807284691612099

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Re: Cloudflare to cut about 20% of its workforce

#75

Post by keybored »

fuddle wrote: post #17

It looks like they are using the "agentic AI era" as an excuse to restructure in order to boost margins. GAAP gross margin dropped ~5 points YoY (76% -> 71%)

Whatever the play here they can’t be angling for any external PR or internal morale boost. What if they wrote: “This is a tough economy and we have to tighten our belts.” Maybe that’s naive of me. Bad signal to investors as opposed to insignificant employees and commoners (PR)?

But contrast with this:

> The way we work at Cloudflare has fundamentally changed. We don’t just build and sell AI tools and platforms. We are our own most demanding customer. Cloudflare’s usage of AI has increased by more than 600% in the last three months alone. Employees across the company from engineering to HR to finance to marketing run thousands of AI agent sessions each day to get their work done. That means we have to be intentional in how we architect our company for the agentic AI era in order to supercharge the value we deliver to our customers and to honor our mission to help build a better Internet for everyone, everywhere.

What is this even saying? We use a lot of AI. And not just for other people... for ourselves. This means that: we need to be intentional?

What is a regular, not-investor, person supposed to glean from this? We’ve hit the automation jackpot: some of you will be fired, some of you will get more work for the same pay?[1] Along with shoving your face with euphoric buzzwords “AI era”, “supercharge the value”.

I must surmise that whatever PR and internal morale blow (?) matters so little to them. They are not at all afraid of any backlash from any lowly people.

[1] Again. This paragraph isn’t saying anything beyond that they are using AI and ho-ho things are a-changing. So one has to guess.

Re: Cloudflare to cut about 20% of its workforce

#76

Post by benmusch »

thrance wrote: post #66
everfrustrated wrote: post #44

There was an recent article on X with an interesting take - it could be that companies are doing layoffs not because AI is making them more productive but because it hasn't . Their costs have gone up paying for expensive AI but haven't seen any revenue benefits to offset it. Article https://x.com/championswimmer/status/2051807284691612099

Personally, I think AI is just a convenient scapegoat for these mass layoffs. Also, these kinds of announcements contribute to sustaining the AI hype which all tech investors benefit from. And investors looove hearing about mass layoffs, stock goes up every time without fail.

cloudflare stock went down, genius

investors are not some nefarious monolith cheering for companies to make decisions based on how it benefits The Vibes. they're analysts assessing business decisions.

Re: Cloudflare to cut about 20% of its workforce

#77

Post by Snoozle »

"We are our own most demanding customer. Cloudflare’s usage of AI has increased by more than 600% in the last three months alone. Employees across the company from engineering to HR to finance to marketing run thousands of AI agent sessions each day to get their work done. That means we have to be intentional in how we architect our company for the agentic AI era in order to supercharge the value we deliver to our customers and to honor our mission to help build a better Internet for everyone, everywhere." As an English enthusiast, I'm getting very frustrated at how the language is consistently abused in executive communications to write words without saying anything.

The implication that is NOT said is that suddenly 20% of people were sitting around without any work to do because AI was making everyone so efficient and productive. This does not, however, seem to be the reality, based on conversations within the company. It appears we have yet another case of economic downturn disguised as increasing velocity.

Re: Cloudflare to cut about 20% of its workforce

#80

Post by keybored »

zb3 wrote: post #46
nasso_dev wrote: post #22

titling "Building for the Future" the announcement of a mass lay-off is disgusting and makes me sick to be honest is this really the future we want to build?

The future, for those who have the capital. The rest may die, shareholders don't care.

Then we must build our own future. One where we deny the capitalists access to their own automated killer robot armies.
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