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Jack Dorsey slashed Block’s headcount from over 10,000 to under 6,000, calling AI the catalyst. Shares surged 23 per cent overnight. The question nobody on the earnings call asked: what happens when customers notice?
There is something almost perverse about the arithmetic. Block reported its strongest quarter in years on 26 February — gross profit up 24 per cent year-on-year to $2.87 billion, Cash App monthly actives at 59 million, full-year gross profit of $10.36 billion — and then, in the same shareholder letter, told roughly 4,000 people their services were no longer required. Not because the business was struggling. Precisely because it was not.
Dorsey framed the decision in language borrowed more from a manifesto than a quarterly filing. “Intelligence tools have changed what it means to build and run a company,” he wrote. “I don’t think we’re early to this realization. I think most companies are late.” The restructuring will shrink Block (NYSE: XYZ) from over 10,000 employees to just under 6,000 and cost between $450 million and $500 million in severance and related charges, most of it front-loaded into Q1, according to the company’s SEC filing. Affected staff will receive twenty weeks of salary plus one additional week for each year of service, equity vested through May, six months of healthcare and a $5,000 transition payment.
The Numbers That Made Investors Cheer
Wall Street’s reaction was swift and unambiguous. XYZ shares, which closed at $54.53 on 26 February, jumped roughly 23 per cent in after-hours trading to $67.15, as reported by CNBC. By the following afternoon the stock was changing hands around $62–65, still well below its 52-week high of $82.50 but a decisive reversal for a ticker that had lost 40 per cent of its value since the start of 2025. BTIG reiterated a Buy rating with a $90 target on 27 February.
The earnings themselves were solid, if unremarkable before the restructuring announcement. Adjusted EPS came in at $0.65 on revenue of $6.25 billion, matching LSEG consensus on earnings and marginally beating on revenue, per CNBC. Cash App gross profit surged 33 per cent to $1.83 billion in Q4 alone. For 2026, Block guided to $12.2 billion in gross profit and adjusted EPS of $3.66 — comfortably ahead of the $3.22 analysts had pencilled in. First-quarter operating income guidance of $600 million also topped the $574 million Street estimate. KBW analysts noted that “more of the profitability upside related to the headcount reduction is expected in the second quarter and into the second half,” according to American Banker.
The AI Thesis — and Its Cautionary Twin
Block’s internal AI tool, called Goose, is at the centre of Dorsey’s bet. Every remaining employee is now required to use generative AI daily, with usage tracked and folded into performance reviews, according to reporting by Metaintro. Dorsey himself processes weekly employee accomplishment emails through AI summaries. The model is blunt: AI handles more, humans handle less, and whatever falls between gets automated next.
It is worth measuring that confidence against the experience of Klarna, which ran an almost identical experiment two years earlier. The Swedish buy-now-pay-later firm shrank from 5,527 employees in 2022 to roughly 2,900 by late 2025, replacing departing staff with OpenAI-powered chatbots rather than new hires. CEO Sebastian Siemiatkowski initially celebrated the savings — revenue per employee more than quadrupled from roughly $300,000 to $1.3 million between 2022 and 2025, according to company filings, and the firm returned to profitability ahead of its US IPO. But by early 2025, as CNBC and Bloomberg reported, internal reviews revealed that customer service quality had deteriorated. Siemiatkowski publicly conceded the company “went too far,” and by February 2026 Klarna had pivoted to a hybrid model, rehiring human agents for complex cases while AI handled routine queries. Glassdoor ratings, according to FXC Intelligence analysis, had slipped from 3.8 to 3.0 during the AI-first period.
Block may avoid that trap — payments infrastructure is different from consumer support — but the parallel is hard to ignore. Bloomberg noted that some analysts have questioned whether companies citing AI as a catalyst for cuts are genuinely being transformed by the technology or simply using it as convenient cover for cost reductions they would have pursued regardless.
A Quarter-Million Jobs and Counting
Block’s announcement did not land in isolation. January 2026 produced the highest layoff count to open a year since 2009, according to outplacement firm Challenger, Gray & Christmas. Amazon confirmed roughly 16,000 corporate job cuts in January alone, Reuters reported, bringing its cumulative reductions since late 2025 close to 30,000. Meta shed 1,500 positions from its Reality Labs division as it redirected investment from virtual reality toward wearables and AI research. eBay announced 800 cuts — its third workforce reduction in three years, per TechCrunch. Pinterest disclosed plans to eliminate 15 per cent of its staff to fund AI-related product work, and Autodesk trimmed seven per cent, roughly 1,000 roles, to accelerate its cloud and artificial intelligence initiatives that are reshaping entire sectors from drug discovery to design software. ASML cut 1,700 roles across the Netherlands and the United States.
The pattern is now familiar enough to have its own vocabulary. Shopify CEO Tobi Lütke set the template in April 2025 with an internal memo, later posted on X, ordering teams to prove that AI could not perform a task before requesting additional headcount. Performance reviews at the e-commerce firm now include questions on AI fluency. Across the tech sector, InformationWeek estimated that nearly 245,000 positions were eliminated globally in 2025 — Layoffs.fyi’s narrower tracker put the US-weighted figure closer to 124,000 — and a Resume.org survey of 1,000 US hiring managers found that 55 per cent expected further cuts in 2026, with 44 per cent naming AI as the primary driver.
What the Stock Price Does Not Price In
For all the euphoria, there are loose threads. A report by Bull Theory flagged that Block spent approximately $68 million on a single corporate event in September 2025 — roughly the annual payroll of 200 employees at $340,000 each — just five months before telling 4,000 workers they were surplus to requirements. Halper Sadeh LLC has opened a probe into potential fiduciary breaches, adding a layer of legal risk. And Block’s own workforce history raises questions about discipline: headcount nearly tripled between 2019 and 2023, according to Live Data Technologies, with the company continuing to hire well after peers like Shopify and Coinbase had already begun cutting. The semiconductor-fuelled rally on Seoul’s Kospi shows what happens when AI investment translates into tangible output; Block will need to demonstrate the same before the restructuring charge fades from memory.
Dorsey told analysts he expects other companies to follow suit. “I’d rather get there honestly and on our own terms than be forced into it reactively,” he said. Whether that proves prescient or premature depends on a question no AI model can yet answer: how much institutional knowledge walks out the door with those 4,000 severance packages, and how long it takes to notice what’s missing.
