It was a brutal Thursday at Block.
Block, the funds agency behind Square, Cash App, and Afterpay, introduced it is going to lower greater than 4,000 staff, about 40% of its workforce. The transfer reduces headcount from over 10,000 to simply underneath 6,000.
CEO Jack Dorsey shared the information in a prolonged word to employees posted on X:
“today we’re making one of the hardest decisions in the history of our company: we’re reducing our organization by nearly half, from over 10,000 people to just under 6,000,” Dorsey wrote on X.
He made clear the layoffs should not tied to weak efficiency. “we’re not making this decision because we’re in trouble. our business is strong. gross profit continues to grow,” he wrote.
Block’s newest earnings seem to help that declare. The firm reported adjusted earnings of 65 cents per share within the fourth quarter, up from 47 cents a 12 months earlier. Gross revenue rose 24%, pushed partly by sturdy progress at Cash App. Shares surged greater than 20% in prolonged buying and selling following the announcement.
Dorsey stated the cuts mirror a deeper shift in how corporations function as synthetic intelligence instruments develop into extra succesful.
“we’re already seeing that the intelligence tools we’re creating and using, paired with smaller and flatter teams, are enabling a new way of working which fundamentally changes what it means to build and run a company. and that’s accelerating rapidly,” he wrote.
In feedback reported by Reuters, Dorsey added:
“Intelligence tools have changed what it means to build and run a company. We’re already seeing it internally. A significantly smaller team using the tools can do more and do it better.” He additionally predicted that others would observe. “Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes,” he wrote.
The firm expects to incur roughly $450 million to $500 million in restructuring prices because it pivots to what it describes as an AI-embedded working mannequin.
Pandemic hiring, now reversed
The huge lower additionally addresses what some critics referred to as “managerial incompetence” in the course of the pandemic. Responding to a critic on X, Dorsey admitted the corporate over-hired in the course of the COVID-19 period on account of a fractured inner construction between Square and Cash App.
However, he defended the present pivot as a drive towards excessive effectivity, stating the corporate is now concentrating on “$2M+ gross profit per person,” which might be 4 occasions its pre-COVID effectivity ranges.
Dorsey stated he selected a single deep spherical of layoffs as a substitute of smaller, repeated cuts. “I had two options: cut gradually over months or years as this shift plays out, or be honest about where we are and act on it now. I chose the latter,” he wrote.
Not alone within the woods
Block isn’t the one tech firm swinging the ax and blaming AI.
- Amazon lower 16,000 staff in January, following 14,000 layoffs a number of months earlier.
- Meta has trimmed lots of from its AI unit and plans to chop 10% of its Reality Labs division.
- Pinterest introduced layoffs of “less than 15 percent” and, like Block, pointed to shifting assets towards AI.
- eBay lower about 800 roles, roughly 6% of its workforce, the identical day Block introduced its cuts.
As instruments like Anthropic’s Claude and OpenAI’s Codex start to automate duties that when required massive groups of extremely educated people, the AI-driven overhaul at Block might certainly be the “seminal moment” analysts are calling it, a glimpse right into a future the place essentially the most profitable corporations are those with the fewest individuals.
Related studying: Learn how AI-driven restructuring may disproportionately impression girls within the workforce.
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