Jack Dorsey's Block cuts 40% of staff, 4,000+ people — and yes, it's because of AI efficiencies

Former Twitter co-founder Jack Dorsey's new company Block — the parent of merchants payment system Square, mobile peer-to-peer payments Cash App, music streamer Tidal, and open source AI orchestration system Goose — is sending shockwaves across the business world tonight after announcing a more than 40% headcount, cutting its workforce by more than 4,000 people out of a prior total of 10,000, despite its latest quarterly earnings statement released today showing $2.87 billion in gross profit up 24% year-over-year.

The culprit? Newfound AI efficiencies. As Dorsey put it in a note shared on his own former social network, X:

"we're not making this decision because we're in trouble. our business is strong. gross profit continues to grow, we continue to serve more and more customers, and profitability is improving. but 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. and that's accelerating rapidly.

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. repeated rounds of cuts are destructive to morale, to focus, and to the trust that customers and shareholders place in our ability to lead. i'd rather take a hard, clear action now and build from a position we believe in than manage a slow reduction of people toward the same outcome. a smaller company also gives us the space to grow our business the right way, on our own terms, instead of constantly reacting to market pressures."

Technology: The "agentic" shift

The core of this reorganization is a pivot toward an "intelligence-native" model. Dorsey argues that a significantly smaller team, leveraging the very tools they are building, can deliver more value than a traditional large-scale organization. Block is re-engineering its entire operational stack to be orchestrated by AI, moving away from human-intensive management hierarchies toward what it calls "agentic AI infrastructure".

This includes four primary focus areas:

• Customer Capabilities: Atomic features that allow customers to build directly on top of Block's infrastructure.

• Proactive Intelligence: Moving from reactive dashboards to tools like Moneybot that anticipate customer needs before they ask.

• Intelligence Models: A system to orchestrate the company’s internal operations, aiming for extreme speed and product velocity.

• Operational Orchestration: An AI model designed to manage the internal decision-making and risk-assessment processes of the firm.

Product: scaling strength via automation

The financial strength cited in the lede is driven by deep engagement in Cash App and Square. Cash App’s gross profit grew 33% YoY to $1.83 billion, while Square saw its strongest year on record for new volume added (NVA).

Specific product highlights include:

• Cash App Green: This status program for "modern earners" — a segment of 125 million people including gig workers and freelancers — has become a cornerstone of the company’s engagement strategy.

• Square AI: Now embedded in the Square Dashboard, it provides sellers with instant insights into staffing and customer behavior.

• Consumer Lending: Cash App Borrow origination volume surged 223% YoY, proving to be a high-return product that manages income variability for users.

Block also exceeded the Rule of 40—the industry benchmark where the sum of gross profit growth and adjusted operating income margin exceeds 40%—for the first time in the fourth quarter.

Community reactions

Not everyone was convinced by Dorsey's letter stating that AI efficiencies were the primary driver of the layoffs. As Will Slaughter wrote on X: "In 3 years from December 2019 to December 2022, Block $XYZ more than tripled its headcount from 3,900 to 12,500. Unwinding less than half an insane COVID overhiring binge has much more to do with Jack Dorsey's managerial incompetence than whether AI is going to take your job."

Entrepreneur Marcelo P. Lima offered a similar sentiment on X, writing in part: "Everyone will assume Jack Dorsey 'greatest of all time' is doing this because of AI. He's not. Block has been massively bloated for years. Don't forget, Jack was head of Twitter. When Elon took over, he fired 80% of staff within 5 months and the product got better. This was before generative AI and Claude Code."

Dorsey, for his part, disputed claims of the layoffs being driven by mismanagement or overhiring correction. In a response to Slaughter on X posted after this article was published, Dorsey wrote: "yes we over-hired during covid because i incorrectly built 2 separate company structures (square & cash app) rather than 1, which we corrected mid 2024. but this misses all the complexity we took on through lending, banking, and BNPL. and that we’re now targeting $2M+ gross profit per person, 4x our pre-covid efficiency, which stayed flat at ~$500k from 2019 until 2024. we have and do run an efficient company… better than most."

And yet, regardless of how heavily AI factored into these layoffs in particular, the outcome on the wider enterprise landscape may ultimately be the same. With Block's stock price rising more than 24% on the news, the boards and leadership of other public companies will likely be forced to at least entertain the idea of similarly drastic cuts if they believe AI can replace human labor and drive greater organizational efficiencies.

As user @khuppy wrote on X: "By Q2, if you aren’t firing lots of employees, your board will fire you for being a dinosaur who doesn’t implement AI. It’s going to happen fast now. Feudalism, here we come…"

Clearly, companies across sectors but especially those in tech and services will be re-examining their headcount in light of Block's latest move.

The human cost

Despite the robust financial performance, the human cost is stark. The reduction from over 10,000 to just under 6,000 employees is one of the most drastic in fintech history. Dorsey’s internal note, while aimed at transparency, was met with a mix of awe at the technical vision and criticism of the timing.

Affected employees are receiving a severance package that includes 20 weeks of salary plus one week per year of tenure, equity vesting through May, and a $5,000 transition fund.

Dorsey noted that communication channels would stay open through Thursday evening so the team could say goodbye properly, stating, "i'd rather it feel awkward and human than efficient and cold."

How enterprise decision-makers and leaders should interpret the news

For enterprise decision-makers, Block’s move represents a fundamental challenge to the "growth at all costs" hiring model that has defined the last decade of tech.

Leadership teams should view this not merely as a cost-cutting measure, but as a strategic reset where organizational value is measured by the ratio of output to "intelligence-native" tools rather than total headcount. Executives should begin by auditing their own internal workflows to identify where agentic AI can consolidate roles and flatten management hierarchies before market pressures force a more reactive, less orderly contraction.

Even if not leading to as drastic of cuts, hiring slowdowns and freezes, Block's move should likely prompt at least the kind of policy introduced separately by Shopify CEO Tobi Lutke nearly a year ago: "Before asking for more Headcount and resources, teams most demonstrate why they cannot get what they want done using AI."

While the community reaction to Block’s layoffs highlights the potential for brand damage and morale loss, the 24% surge in Block’s stock price suggests that the public market is increasingly rewarding lean, automated efficiency over human-intensive scaling.

Decision-makers should evaluate their current "bloat" against the benchmark set by Dorsey: if a company of 6,000 can drive $12.20 billion in gross profit, the standard for organizational efficiency has been permanently raised.