Cloudflare shares drop 21% after Q1 beat but issues weak guidance and major AI-driven restructuring

Cloudflare reported strong Q1 2026 results beating revenue and earnings estimates, driven by AI demand and enterprise adoption. However, shares fell over 21% after the company issued softer Q2 revenue guidance and announced a major restructuring to shift toward an AI-first operating model, including cutting about 1,100 jobs and incurring $140-$150 million in charges. The restructuring aims to accelerate Cloudflare's AI strategy and is expected to complete by Q3 2026. Despite the short-term hit, Cloudflare CEO emphasized the strategic shift to enhance customer value through AI integration.