On February 26, 2026, Jack Dorsey cut 4,000 people from Block — 40% of the company's workforce — and framed it as the future arriving on schedule.
The stock surged 25%.
That is the only number that matters for what happens next.
The Facts
Block, the parent company of Square, Cash App, and Tidal, is going from roughly 10,200 employees to just under 6,000. Dorsey announced it in a shareholder letter and a post on X. He was direct about two things: first, the business is healthy. Q4 2025 gross profit was up 24% year-over-year. Cash App revenue grew 33%. Adjusted EPS beat estimates. Block is not struggling. Second, the layoffs are about AI. Specifically, about what Dorsey calls "intelligence tools" — the internal infrastructure Block has been building, including its open-source AI agent Goose, which operates inside development environments — reading code, writing code, running tests, iterating autonomously.
His exact words: "Intelligence tools have changed what it means to build and run a company. We're already seeing it internally. A significantly smaller team, using the tools we're building, can do more and do it better." (CNN)
He chose a single deep cut instead of phased reductions. "Repeated rounds of cuts are destructive to morale, to focus, and to the trust that customers and shareholders place in our ability to lead." (CNBC)
To the people losing their jobs: 20 weeks of salary plus one week per year of tenure, equity vesting through the end of May, six months of healthcare, their corporate devices, and $5,000 cash. That is, by tech layoff standards, generous. Block expects to absorb $450 to $500 million in restructuring charges. (TechCrunch)
The Template
Here is why this matters more than a single company's headcount reduction.
Dorsey said the quiet part out loud: "I don't think we're early to this realization. I think most companies are late. Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes." (VentureBeat)
That is not a CEO explaining his own layoffs. That is a CEO giving every other CEO permission to do the same thing. And the market rewarded him for it — immediately, visibly, by a quarter of the share price. Analysts at Evercore ISI called it "a seminal moment" in the AI era. (Axios)
Every board of directors that watched Block's stock pop 25% on a 40% headcount reduction is now doing the math. Not the AI math. The incentive math. Wall Street just told them: smaller teams, bigger margins, higher stock price. The mechanism does not even need to be real. The signal does.
This is the template. Cut deep. Cite AI. Watch the stock climb. Repeat.
The Skepticism
Not everyone is buying the narrative as sold.
Wharton professor Ethan Mollick responded on X: "Given that effective AI tools are very new, and we have little sense of how to organize work around them, it is hard to imagine a firm-wide sudden 50%+ efficiency gain." He added: "CEOs with vision who hired well should also use AI for expansion and augmentation, not decimation."
Others pointed to the headcount history. Block had 3,835 employees at the end of 2019. During the pandemic hiring binge, they tripled to over 12,500 by the end of 2022. They have been cutting ever since — a thousand in January 2024, another 930 in March 2025. This latest round takes them to about 6,000. One commentator on X summarized it plainly: "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." (SF Standard)
A Forrester Research report from last month cast doubt on whether the AI efficiency gains companies are claiming are real or whether the technology is simply providing a convenient narrative for financially motivated layoffs.
These are fair questions. A company that grew from 4,000 to 12,500 in three years did not have an AI problem. It had a hiring problem. Dressing the correction as a technological transformation is a better story than admitting you ran the headcount up recklessly during the cheap-money era.
The Part That Is Real
But here is where I push back on the skeptics, too.
Block is not making this up entirely. They built Goose — an open-source AI agent that integrates with Anthropic's Model Context Protocol, that operates inside development environments, that can rewrite software platforms across programming languages. Block's CFO Amrita Ahuja said engineering output per person is up more than 40% since September. (SiliconANGLE)
I have been writing about this dynamic for months. Agentic AI tools — the ones that do not just answer questions but actually execute workflows — compress the work of teams into the output of individuals. I have lived it. I am a solo operator producing work that used to require a department. The compression is not hypothetical.
What Mollick is right about is the speed of the claim. A 40% reduction implies Block figured out, company-wide, how to reorganize every workflow around AI in less than a year. That strains belief. The Solow paradox exists precisely because organizations are slow to restructure around new technology. Most of the 90% of executives who report zero productivity gains from AI are using it 1.5 hours a week. The adaptation has barely started.
So it is probably both things at once. Block over-hired during the pandemic, and AI is genuinely compressing the amount of human labor required. Dorsey is using the second fact to narrate the correction of the first one. It is a more compelling pitch to shareholders than "we got drunk on zero interest rates."
The 4,000
Inside Block, the mood is what you would expect. One employee at a recent staff meeting said morale is "probably the worst I've felt in four years." Workers reportedly started calling Dorsey "blockhead" instead of "Block head." (Inc.)
Dorsey acknowledged receiving thousands of messages from employees expressing "widespread concerns about layoffs" and "the tension between accelerating delivery through AI adoption versus maintaining code quality and engineering rigor."
That tension is real and will not be resolved by a severance package. The people left behind now carry the entire operational load of a company that just lost 40% of its institutional knowledge. If the AI tools work as advertised, they will manage. If the tools do not work as advertised — if this was over-hire correction wearing an AI costume — the remaining 6,000 are about to learn what it feels like to be the ones the acceleration tax hits hardest.
The Signal for the Rest of Us
I wrote in The Gap about AI models forecasting their own workforce impact. I wrote in Something Big Is Already Here about the white-collar disruption wave that was approaching. This is what it looks like when it arrives.
Not gradually. Not in a research paper. In a single Thursday announcement from a company that processes your money, that erased 4,000 jobs and was rewarded with a $3 billion market cap increase by the close of the next trading day.
The companies watching are not asking whether Dorsey was right about AI. They are asking whether the stock price bump was real. It was. And that is the only question the next CEO needs answered before doing the same thing.
Pinterest. CrowdStrike. Chegg. Amazon. eBay. Salesforce. These companies have already started cutting with AI as the stated reason. (Axios) A Resume.org survey found 55% of U.S. hiring managers expect layoffs in 2026, with 44% naming AI as the top driver. Block did not start the wave. Block gave the wave a name and a playbook.
This is the first domino. Not because one company cut 4,000 people. Because one company cut 4,000 people and the market applauded. That applause is going to echo through every boardroom in America for the rest of the year.
The Protocol: Block cut 40% of its workforce and the stock surged 25%. Whether AI actually justifies the cuts is the wrong question. The right question is what every other CEO just learned: the market rewards the narrative, and the narrative just got its proof of concept. Dorsey said most companies will follow within a year. He might be right — not because the technology demands it, but because the incentive structure does.
