AI Layoffs: Block Axes 40% Of Staff, Says 'Majority Of Companies Will'

Financial technology firm Block (XYZ) slashed more than 40% of its workforce on Thursday, saying in a letter to shareholders that AI tools “have changed what it means to build and run a company.” The AI layoffs came as the Square payment system and Cash App operator matched fourth-quarter earnings estimates, yet Block shares surged after hours.

The company offered a 2026 outlook for its adjusted operating profit margin to soar to 26% from 17% in 2025, helped by a lower expense structure. Investors also may have been encouraged by growth in monthly active Cash App users to 59 million. In Q4, 9.3 million used Cash App for primary banking services, up 22% from a year ago.

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Evercore ISI analyst Adam Frisch called the layoffs “the seminal moment to date in the AI narrative and how it could transform companies as we know it going forward.”

Software stocks, which have bounced this week after months of AI disruption fears, fell solidly late Thursday.

Futures Fall As AI Disruption Fears Revive

Block AI Layoffs Top 4,000

Block, which is part of the S&P 500, said AI layoffs will shrink the company from over 10,000 employees to just under 6,000. “Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes,” wrote CEO Jack Dorsey. “I’d rather get there honestly and on our own terms than be forced into it reactively.”

Dorsey said that “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.”

Block’s heavy job cuts and the rationale behind them may stir more fears like that raised by Citrini Research with its “Global Intelligence Crisis” essay. The fictional piece looks back at the AI impact from 2028 and imagines mass white-collar layoffs causing a recession and 10%+ unemployment.

The authors said it wasn’t a prediction but a thought exercise about a doomsday scenario that might transpire if AI turns out to be as capable as proponents believe. There’s been quite a bit of pushback against Citrini’s bleak vision. In trying to refute it, market maker Citadel Securities highlighted a recent rise in software engineering job postings on Indeed.

Dorsey’s view that a majority of companies will make similar major restructuring moves within a year might be far off the mark. However, Block’s move underscores how fast everything is changing in hard-to-predict ways. While Block’s AI layoffs may be among the most aggressive to date, the AI jobs impact is spreading. Numerous S&P 500 companies are citing AI capabilities as they shrink their workforces or hold the line on new hiring.

XYZ Stock

Block shares vaulted nearly 25% to 68.10 late Thursday, after rising 5% in the regular session. XYZ stock closed 34% below its 52-week high.

The iShares Expanded Tech-Software Sector ETF (IGV) fell 2.6% in late trade in the wake of Block’s AI-tied layoffs as well as some weak earnings reports. IGV rose 2.2% in Thursday’s session.

Be sure to read IBD’s The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.

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