Fintech giant Block, led by Jack Dorsey, announced on Thursday it would lay off approximately 40% of its workforce – 4,000 employees – citing the increasing capabilities of artificial intelligence. The cuts, impacting the parent company of Square and Cash App, come as Dorsey asserts that a smaller team equipped with AI tools can achieve greater efficiency and output.
“Intelligence tools have changed what it means to build and run a company,” Dorsey wrote in a letter to shareholders. “We’re already seeing it internally. A significantly smaller team, using the tools we’re building, can do more and do it better. And intelligence tool capabilities are compounding faster every week.”
The move sent Block’s stock soaring, with shares increasing by more than 20% in pre-market trading on Friday, indicating investor confidence in Dorsey’s strategy. Despite the substantial workforce reduction, Dorsey maintained that Block’s economic performance remains strong, having recently surpassed Wall Street expectations for the fourth quarter with $6.25 billion in total revenue.
Dorsey explained his decision on X, formerly known as Twitter, stating he faced a choice between prolonged, incremental layoffs or a swift, decisive action. “Repeated rounds of cuts are destructive to morale, to focus and to the trust that customers and shareholders place in our ability to lead,” he wrote.
Block’s embrace of AI is not new, with executives noting on Thursday’s earnings call that the company has been increasing its reliance on the technology for years, with some AI initiatives already fully implemented while others are still in development. However, the scale of the layoffs directly linked to AI adoption marks a significant moment in the tech industry.
The layoffs follow earlier cuts in early February, and come amid reports of declining employee morale. According to Wired, an employee complaint submitted during a recent all-hands meeting described morale as “probably the worst I’ve felt in four years” and indicated a “crumbling” company culture, exacerbated by requirements to utilize generative AI tools.
Dorsey acknowledged the potential risks associated with the workforce reduction, both in his message to shareholders and on X. Block’s most recent 10-K filing highlighted potential pitfalls, stating that the success of operating with a reduced workforce “is expected to depend in part on the effectiveness, reliability and adoption of our proactive intelligence and AI tools.” The filing also cautioned that these technologies “may not perform as expected” and could introduce operational or cybersecurity risks.
Industry analysts suggest Block’s actions could foreshadow a broader trend. Stephen Innes of SPI Asset Management told the Associated Press, “For years, we have debated whether AI would dent jobs at the margin. Now we have a public case study in which the CEO explicitly says that intelligence tools have changed what it means to build and run a company.” He added that other large employers have announced significant cuts in recent months, with Block being unique in its direct attribution to AI.
The announcement adds to growing concerns about AI-driven job displacement. Goldman Sachs recently estimated that AI adoption could lead to monthly net job losses of 5,000 to 10,000 this year, while a November study from MIT suggested AI could already replace nearly 12% of the U.S. Workforce. Salesforce, under CEO Marc Benioff, cut approximately 4,000 jobs last year, with Benioff stating the company “needs less heads” due to AI’s efficiency.
