Cloudflare (NET) Stock Forecast: Cutting 20% of Staff to Go AI-First - Triangle Breakout at $268

TradingKey - Cloudflare (NYSE: NET) trades at $268.33. The stock broke out above a symmetrical triangle on the 4H with RSI at 74.57. Though close to overbought, there’s strong momentum, and there’s no bearish divergence. Cloudflare reported Q1 2026 results May 7. It posted $639.8 million of revenue for the quarter, up 34% from the year-earlier period. There were 4,416 customers with $100,000-plus deals, and deals over $1 million rose 73%, making Q1 2026 its largest-customer quarter.

The earnings headline, however, wasn’t a revenue beat. It was a 20% workforce reduction by CEO Matthew Prince, amounting to about 1,100 people, to transition Cloudflare to an “agentic AI-first operating model.” This was the kind of change that Prince described specifically as a “reimagining,” not an efficiency drive: “This is the biggest change I’ve made in Cloudflare’s history, and I wouldn’t do it unless I was incredibly confident in our future.”

Agentic AI-First Restructuring: What It Means for Cloudflare

This is why Cloudflare cut 1,100 employees (about 20 percent of its workforce) this week despite reporting its best quarter yet in growth with large customers. CEO Matthew Prince explained that Cloudflare is re-engineering its internal workflows to make use of AI agents, with many of the coordination and administrative roles that were needed before being replaced with automation. The company says it’s also adjusting its hiring plans to prioritize engineering, product, and customer-facing roles.

Cloudflare estimates that these changes will incur charges ranging from $140 million to $150 million, likely mostly impacting GAAP results for the second quarter of 2026. Management also expects its total headcount to be larger in 2027 than 2026, which suggests that the company is less focused on a long-term headcount reduction than on the types of roles it employs.

Cloudflare’s deal with Anthropic and its acquisition of open-source JavaScript tooling firm VoidZero, for instance, are meant to help with that strategy. It will help Cloudflare’s use of Anthropic’s Claude AI in its internal workflows, which it says would help automate operational processes and free up employees to focus on more strategic projects. Meanwhile, VoidZero brings several products that make up Vite, an open source ecosystem of build tools that enables frontend developers to build fast websites and applications.

Ultimately, this would give Cloudflare a bigger AI footprint and a more substantial offering in AI-powered security, networking, and developer services, which typically lead to larger and longer-term contracts with enterprise customers than Cloudflare’s traditional CDN and DDoS protection products.

34% Revenue Growth, 73% Increase in $1M+ Deals, and $2.81 Billion Full-Year Guidance

The reorganization is "taking place during a strong business growth cycle, rather than during a time of weakness in demand," the company said in its earnings release. Revenue was up 34% YoY, to $639.8 million, with customers in the $100,000+ annual spend cohort at 4,416. The number of deals at $1 million+ jumped 73% thanks to large enterprise customers consuming its whole stack as one platform, including networking, security, developer tools. Remaining performance obligations was $2.54B suggesting further growth next year. Management guided fiscal 2026 revenue to be $2.805 billion to $2.813 billion, up ~30% YoY.

Cloudflare finished the quarter with $4.16 billion of cash and equivalents, while its outstanding obligations included $3.29 billion of zero coupon convertible notes that will come due in 2030. The strong cash position will allow Cloudflare to fund its acquisition of VoidZero, and continued development of its AI platform without the need for raising more debt or equity. Following the earnings results, investment bank Morgan Stanley raised its target price.

NET Technical Analysis: Triangle Breakout at $268, RSI 74.57, Target $300.30

NET cleared a symmetrical triangle ( A-B-C-D) on the buy-side using green candles and full-bodied candles to soak up sell pressure. The trend line formed by a series of higher lows and higher highs is still intact. The RSI at 74.57 is near overbought levels but still maintaining its upward trajectory and there are not yet any clear signs of a bearish divergence.

Cloudflare (NET) Stock Price Chart - Source: Tradingview

The price target within the triangle is at $289 to $300. Horizontal support is at $238 to $228. Breakout close over $276.10 with the price target to $300.30 with the stop to be below $238.80.

• LONG $276.10+, the symmetrical triangle breakout is confirmed.
• TAKE PROFIT $300.30, the price target within the triangle.
• STOP LOSS < $238.80, the ascending trendline is broken by a 4H close.

Q1 2026 Revenue +34% YoY to $639.8M. Deals $1M+ 73% YoY. 4,416 customers spend $100K+.

Restructure: 20% Workforce Reduction ~1,100 Employees. $140-150M in restructuring charges. Pivot to an AI-first company.

FY2026 Revenue Guide: $2.805B to $2.813B up +30% YoY.

2Q 2026 Revenue Guide: $664 Million to $665 Million

Why Did Cloudflare Cut 20% of Its Workforce After a Record Revenue Quarter?

Cloudflare confirmed Wednesday that it will cut 1,100 employees, roughly 20% of its workforce, as it announced a strong first quarter that showed a record run rate for its million-dollar customer cohort. Revenue of $639.8 million in the three months ended March 31 grew 34% from a year ago. CEO Matthew Prince said the headcount reductions are part of a larger move to AI-operating model, where AI agents will be used for many internal functions, such as customer support, analytics and administrative responsibilities.

Instead, Cloudflare said it plans to hire mostly for product, engineering and customer-facing roles. Prince said total headcount will ultimately be higher in 2027 than at any point in 2026, indicating the company doesn’t anticipate a long-term reduction in staff.

Is NET a Buy at $268 After the Triangle Breakout?

The stock remains on track for a strong run higher as it breaks out of its symmetrical triangle. RSI is currently at 74.57 reflecting strong momentum, although it is approaching overbought territory. If Cloudflare closes above its next resistance level at $276.10, the case for a move toward $300.30 would be strengthened. A close below $238.80 would invalidate the current setup. 

Fundamentally, the company’s impressive 34% revenue growth, its 73% jump in its million-dollar customer cohort over the past year and $2.54 billion of remaining performance obligations are strong indicators for the future. On top of all of that, it just received an upgrade from Morgan Stanley right after earnings.

However, its $140 million to $150 million second-quarter restructuring charge and the execution risk as it transitions into an AI-driven operating model will be the key short-term risks to be aware of here.

Bottom Line

Cloudflare stock trades at $268.33, as it broke out above its symmetrical triangle after reporting record enterprise growth with 34% revenue growth and 73% higher million-dollar customers. The reduction in headcount is due to the company moving toward an AI-driven model rather than a decline in demand, and the company expects headcount growth to pick up again in 2027. Full-year revenue guidance of $2.81 billion implies growth of about 30% for the year and should leave room for any further upside if the current revenue trends continue. And a close above $276.10 would target the $300.30 region.