DIGITAL LIFE

The big tech trend: Jack Dorsey's block lays off 40% of employees and will use AI to replace them

Block, the company behind Square, Cash App, and Afterpay, announced a 40% reduction in its workforce, in a restructuring that should result in the dismissal of more than four thousand people. The decision was communicated in a letter to shareholders signed by co-founder Jack Dorsey, who attributed the cuts to the advancement of Artificial Intelligence (AI) tools.

With this measure, the company should operate with just under six thousand employees. According to Dorsey, who is the co-founder of the former Twitter, the change does not stem from financial difficulties, but from a strategic choice in the face of technological evolution.

"A significantly smaller team, using the tools we are developing, can do more and better. And the capabilities of Artificial Intelligence tools are multiplying ever more rapidly," wrote the executive.

In a post on the social network X, Dorsey stated that the company's performance remains solid:

"Our business is strong… Gross profit continues to grow."

The company's CFO, Amrita Ahuja, reinforced the message by highlighting that Block sees an opportunity to accelerate results with smaller, highly skilled teams, supported by AI-powered automation.

"We see an opportunity to move faster with smaller, highly talented teams, using AI to automate more tasks," she affirmed.

According to the company, affected employees will receive at least 20 weeks' salary as severance pay, with higher amounts for those with longer tenure. The package also includes stock options acquired by the end of May, six months of health insurance, maintenance of corporate devices, and a $5,000 bonus.

Block's move comes at a time when AI is reshaping administrative, operational, and creative roles in the technology sector, broadening the debate about the impact of automation on the job market.

Giants like Amazon, Meta, Microsoft, and Verizon have also made significant cuts in the last year, in restructurings directly or indirectly associated with the incorporation of artificial intelligence into internal processes.

In a memo released in October, Amazon described AI as "the most transformative technology since the internet" and advocated for fewer hierarchical layers to operate with greater agility.

It was only a matter of time before a future-thinking CEO took the leap and replaced thousands of workers with AI.

Block's Jack Dorsey did just that Thursday, and Wall Street's standing ovation gives other CEOs permission, or even an incentive, to consider the same thing.

What he's saying: Dorsey, an iconoclast who co-founded and once led Twitter, was blunt in announcing via X that Block will say goodbye to 40% of its 10,000-person workforce:

"Something has changed. 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," he wrote.

"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."

Zoom in: The fintech's stock rallied as much as 25% on the news, after having been down more than 16% over the past year and 76% over the past five years.

Block's declining stock price put Dorsey under pressure to make changes, although he denied that the layoffs were related to Block's financial performance.

The big picture: Wall Street was recently captivated by a viral doomsday report predicting AI would wipe out jobs, although stated reasons for most other AI-related layoffs so far have been much less explicit than what Dorsey did.

Many AI executives and investors insist that the tech will lead to temporary labor dislocations rather than net job loss, echoing the industrial revolution.

The bottom line: It's one thing to replace people with machines. It's quite another to prove that it makes business sense.

If Block can grow its top line with a much smaller headcount, the rest of Corporate America will take notice.

The AI Impact Claim is Overblown...And then there’s the AI explanation.

AI tools are genuinely useful and getting better, but the most capable AI systems and models still: 1) hallucinate; 2) struggle with complex multi-step reasoning; and 3) require significant human oversight for anything involving real financial risk or regulatory nuance.

Just ask Klarna. In early 2024, it touted that its AI tools could do the work of 700 customer service agents. The company slowed hiring and reduced its employee base from 7,400 to 3,000. A year later, the company backtracked. Klarna CEO Sebastian Siemiatkowski admitted:

“As cost unfortunately seems to have been a too predominant evaluation factor when organizing this, what you end up having is lower quality. Really investing in the quality of the human support is the way of the future for us."

AI tools are impressive. But they’re not--in 2026--capable of replacing 4,000 skilled fintech professionals.

The real story behind the block layoffs...Here’s what Wall Street is ignoring: Block is a financial services company. Square processes payments for small businesses. Cash App handles peer-to-peer money transfers, direct deposit, tax filing. Afterpay runs a buy-now-pay-later operation.

These aren’t businesses where “move fast and break things” is a strategy. Block’s already been the subject of compliance criticism. In January 2026, a California federal judge ruled that Block’s officers and directors must face claims of compliance failures in a class action and separate derivative suit, finding that the company’s board failed to properly oversee the company’s compliance program.

The idea that gutting the human workforce in favor of AI “intelligence tools” makes the compliance and risk surface smaller, not larger, requires a leap of faith that, apparently, Wall Street seems willing to make.

The rest of us would be crazy to take that leap.

Here’s more crazy: Dorsey promised a “live video session to thank everyone,” which he acknowledged “might feel awkward.” Ya think? You’re firing 4,000 people on an earnings call and you’re going to hop on a livestream to say thanks?

To be crystal clear about what actually happened today: a company that inflated its headcount by 160% during a period of easy money has now, under considerably more pressure, cut back aggressively while blaming the future instead of the past.

The AI framing is convenient. It’s also good for the stock, which is why the stock is up 20% after hours. Wall Street doesn’t care whether the “intelligence tools” are actually ready. Wall Street cares that the labor cost line is about to get a lot shorter.

Block didn’t cut 4,000 jobs because AI made them obsolete. It laid off staff because the company overhired, the macro story turned, and the bill came due. That’s a legitimate business decision. It might even have been unavoidable.

by mundophone