CLOUDFLARE INC (-) : RIF analysis: A builder, seller or measurer? Turns out all three

Research evidence excerpt

CLOUDFLARE INC (-) : RIF analysis: A builder, seller or measurer? Turns out all three

EQUITIES

SOFTWARE

CLOUDFLARE INC UNDERPERFORMPRICE* USD250.1  TARGET PRICE USD165 (DOWNSIDE 34%) TARGET 22%PRICE EPS67%26e EPS35%27e

RIF analysis: A builder, seller or measurer? Turns out all three

Cloudlfare last month announced a RIF impacting ~20% of the workforce, this caught investors by8 JUNE 2026

Securities Research Report surprise given strong growth metrics. CEO Matthew Prince, in a WSJ OpEd, highlighted it was mainly

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targeting ‘measurers’ (i.e. not sales or engineering). While it’s still early, we extracted data on the

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recent RIF and based on our sample, the layoffs appear to be more broad and we believe driven by

Andrew DeGasperi cost considerations, given the pressure on gross margins and is relevant given investor expect aBNP Paribas Securities Corp1

(+1) 917 472 4745 ‘Rule of 50’ discussion at its analyst day on June 9. We raise our EPS estimates to reflect operating

andrew.degasperi@us.bnpparibas.com efficiencies from the RIF and raise our TP from $135 to $165 on peer multiple expansion.

Ari Friedman

BNP Paribas Securities Corp1 ‘The world is changing and the workforce must change with it’

(+1) 917 286 8860 CEO Matthew Prince cited Peter Drucker’s ‘The Practice of Management’, in defense of his actions.

ari.friedman@us.bnpparibas.com Conceptually, we don’t disagree with AI driving change but: 1) This drastic shift in headcount could

Jack Pearson impact near-term momentum (e.g. customer service, additional turnover, etc); and 2) We track

BNP Paribas Securities Corp1 Cloudflare’s headcount monthly and while there is only a 1% decrease MoM, this would take it back