Former Twitter co-founder Jack Dorsey's new firm Block — the mum or dad of retailers fee system Sq., cellular peer-to-peer funds Money App, music streamer Tidal, and open supply AI agentic system Goose — is sending shockwaves throughout the enterprise world tonight after asserting a greater than 40% headcount, slicing its workforce by greater than 4,000 folks out of a previous complete of 10,000, regardless of its newest quarterly earnings assertion launched right now exhibiting $2.87 billion in gross revenue up 24% year-over-year.
The offender? Newfound AI efficiencies. As Dorsey put it in a observe shared on his personal former social community, X:
"we're not making this choice as a result of we're in hassle. our enterprise is powerful. gross revenue continues to develop, we proceed to serve increasingly more clients, and profitability is enhancing. however one thing has modified. we're already seeing that the intelligence instruments we’re creating and utilizing, paired with smaller and flatter groups, are enabling a brand new approach of working which essentially modifications what it means to construct and run an organization. and that's accelerating quickly.
i had two choices: reduce step by step over months or years as this shift performs out, or be sincere about the place we’re and act on it now. i selected the latter. repeated rounds of cuts are harmful to morale, to focus, and to the belief that clients and shareholders place in our capability to guide. i'd moderately take a tough, clear motion now and construct from a place we imagine in than handle a sluggish discount of individuals towards the identical final result. a smaller firm additionally offers us the house to develop our enterprise the appropriate approach, on our personal phrases, as a substitute of regularly reacting to market pressures."
Expertise: The "agentic" shift
The core of this reorganization is a pivot towards an "intelligence-native" mannequin. Dorsey argues {that a} considerably smaller crew, leveraging the very instruments they’re constructing, can ship extra worth than a standard large-scale group. Block is re-engineering its complete operational stack to be orchestrated by AI, transferring away from human-intensive administration hierarchies towards what it calls "agentic AI infrastructure".
This contains 4 main focus areas:
Buyer Capabilities: Atomic options that enable clients to construct straight on high of Block's infrastructure.
Proactive Intelligence: Shifting from reactive dashboards to instruments like Moneybot that anticipate buyer wants earlier than they ask.
Intelligence Fashions: A system to orchestrate the corporate’s inside operations, aiming for excessive pace and product velocity.
Operational Orchestration: An AI mannequin designed to handle the inner decision-making and risk-assessment processes of the agency.
Product: scaling energy by way of automation
The monetary energy cited within the lede is pushed by deep engagement in Money App and Sq.. Money App’s gross revenue grew 33% YoY to $1.83 billion, whereas Sq. noticed its strongest yr on file for brand new quantity added (NVA).
Particular product highlights embody:
Money App Inexperienced: This standing program for "fashionable earners" — a phase of 125 million folks together with gig staff and freelancers — has change into a cornerstone of the corporate’s engagement technique.
Sq. AI: Now embedded within the Sq. Dashboard, it offers sellers with prompt insights into staffing and buyer conduct.
Client Lending: Money App Borrow origination quantity surged 223% YoY, proving to be a high-return product that manages earnings variability for customers.
Block additionally exceeded the Rule of 40—the trade benchmark the place the sum of gross revenue progress and adjusted working earnings margin exceeds 40%—for the primary time within the fourth quarter.
Group reactions
Not everybody was satisfied by Dorsey's letter stating that AI efficiencies had been the first driver of the layoffs. As Will Slaughter wrote on X: "In 3 years from December 2019 to December 2022, Block $XYZ greater than tripled its headcount from 3,900 to 12,500. Unwinding lower than half an insane COVID overhiring binge has way more to do with Jack Dorsey's managerial incompetence than whether or not AI goes to take your job."
Entrepreneur Marcelo P. Lima supplied an identical sentiment on X, writing partially: "Everybody will assume Jack Dorsey 'biggest of all time' is doing this due to AI. He's not. Block has been massively bloated for years. Don't neglect, Jack was head of Twitter. When Elon took over, he fired 80% of employees inside 5 months and the product acquired higher. This was earlier than generative AI and Claude Code."
And but, no matter how closely AI factored into these layoffs particularly, the result on the broader enterprise panorama could in the end be the identical. With Block's inventory value rising greater than 24% on the information, the boards and management of different public corporations will seemingly be pressured to at the very least entertain the thought of equally drastic cuts in the event that they imagine AI can change human labor and drive larger organizational efficiencies.
As person @khuppy wrote on X: "By Q2, if you happen to aren’t firing numerous staff, your board will hearth you for being a dinosaur who doesn’t implement AI. It’s going to occur quick now. Feudalism, right here we come…"
Clearly, corporations throughout sectors however particularly these in tech and providers shall be re-examining their headcount in gentle of Block's newest transfer.
The human price
Regardless of the sturdy monetary efficiency, the human price is stark. The discount from over 10,000 to only beneath 6,000 staff is without doubt one of the most drastic in fintech historical past. Dorsey’s inside observe, whereas geared toward transparency, was met with a mixture of awe on the technical imaginative and prescient and criticism of the timing.
Affected staff are receiving a severance bundle that features 20 weeks of wage plus one week per yr of tenure, fairness vesting via Might, and a $5,000 transition fund.
Dorsey famous that communication channels would keep open via Thursday night so the crew may say goodbye correctly, stating, "i'd moderately it really feel awkward and human than environment friendly and chilly."
How enterprise decision-makers and leaders ought to interpret the information
For enterprise decision-makers, Block’s transfer represents a basic problem to the "progress in any respect prices" hiring mannequin that has outlined the final decade of tech.
Management groups ought to view this not merely as a cost-cutting measure, however as a strategic reset the place organizational worth is measured by the ratio of output to "intelligence-native" instruments moderately than complete headcount. Executives ought to start by auditing their very own inside workflows to establish the place agentic AI can consolidate roles and flatten administration hierarchies earlier than market pressures drive a extra reactive, much less orderly contraction.
Even when not resulting in as drastic of cuts, hiring slowdowns and freezes, Block's transfer ought to seemingly immediate at the very least the form of coverage launched individually by Shopify CEO Tobi Lutke almost a yr in the past: "Earlier than asking for extra Headcount and assets, groups most reveal why they can not get what they need finished utilizing AI."
Whereas the neighborhood response to Block’s layoffs highlights the potential for model injury and morale loss, the 24% surge in Block’s inventory value means that the general public market is more and more rewarding lean, automated effectivity over human-intensive scaling.
Determination-makers ought to consider their present "bloat" towards the benchmark set by Dorsey: if an organization of 6,000 can drive $12.20 billion in gross revenue, the usual for organizational effectivity has been completely raised.
