Cloudflare, Inc. (NET) shares plummeted 16.66% in pre-market trading Friday. The sharp decline followed the company's post-market earnings release, which included a significant corporate restructuring announcement and quarterly guidance that failed to impress investors.

The internet infrastructure and cybersecurity firm announced plans to cut approximately 20% of its global workforce, amounting to over 1,100 jobs. Management stated the move is part of a strategic shift to an "agentic AI-first operating model," citing a more than 600% increase in employee AI tool usage last quarter. The company expects to incur restructuring charges between $140 million and $150 million, with the majority recognized in the current quarter.

Despite reporting first-quarter revenue and adjusted earnings that exceeded analyst expectations, Cloudflare provided second-quarter revenue guidance between $664 million and $665 million. The midpoint of this range fell slightly short of the $665.3 million estimate compiled by LSEG. The combination of substantial near-term restructuring costs and a revenue outlook that did not meet elevated market expectations drove the severe sell-off in the stock.