Former Twitter co-founder Jack Dorsey's new firm Block — the mum or dad of retailers fee system Sq., cell 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, chopping its workforce by greater than 4,000 folks out of a previous whole of 10,000, regardless of its newest quarterly earnings assertion launched right now displaying $2.87 billion in gross revenue up 24% year-over-year.
The perpetrator? Newfound AI efficiencies. As Dorsey put it in a notice shared on his personal former social community, X:
"we're not making this determination as a result of we're in bother. our enterprise is robust. gross revenue continues to develop, we proceed to serve increasingly 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 steadily over months or years as this shift performs out, or be trustworthy 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 capacity to guide. i'd fairly 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 proper approach, on our personal phrases, as a substitute of regularly reacting to market pressures."
Know-how: The "agentic" shift
The core of this reorganization is a pivot towards an "intelligence-native" mannequin. Dorsey argues {that a} considerably smaller group, leveraging the very instruments they’re constructing, can ship extra worth than a conventional large-scale group. Block is re-engineering its total operational stack to be orchestrated by AI, shifting away from human-intensive administration hierarchies towards what it calls "agentic AI infrastructure".
This contains 4 major 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 velocity 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 through 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 document for brand new quantity added (NVA).
Particular product highlights embrace:
Money App Inexperienced: This standing program for "fashionable earners" — a phase of 125 million folks together with gig staff and freelancers — has turn out to be a cornerstone of the corporate’s engagement technique.
Sq. AI: Now embedded within the Sq. Dashboard, it gives sellers with on the spot insights into staffing and buyer conduct.
Shopper 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 far 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 partly: "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 workers inside 5 months and the product obtained higher. This was earlier than generative AI and Claude Code."
And but, no matter how closely AI factored into these layoffs particularly, the end result on the broader enterprise panorama could in the end be the identical. With Block's inventory worth rising greater than 24% on the information, the boards and management of different public corporations will probably be compelled to at the very least entertain the concept of equally drastic cuts in the event that they imagine AI can substitute human labor and drive higher organizational efficiencies.
As person @khuppy wrote on X: "By Q2, in the event you aren’t firing a lot of workers, your board will fireplace 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 will probably be re-examining their headcount in gentle of Block's newest transfer.
The human price
Regardless of the strong monetary efficiency, the human price is stark. The discount from over 10,000 to simply below 6,000 workers is without doubt one of the most drastic in fintech historical past. Dorsey’s inside notice, whereas aimed toward transparency, was met with a mixture of awe on the technical imaginative and prescient and criticism of the timing.
Affected workers are receiving a severance bundle that features 20 weeks of wage plus one week per yr of tenure, fairness vesting by means of Could, and a $5,000 transition fund.
Dorsey famous that communication channels would keep open by means of Thursday night so the group might say goodbye correctly, stating, "i'd fairly 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 elementary 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 fairly than whole headcount. Executives ought to start by auditing their very own inside workflows to determine the place agentic AI can consolidate roles and flatten administration hierarchies earlier than market pressures power 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 probably immediate at the very least the type of coverage launched individually by Shopify CEO Tobi Lutke almost a yr in the past: "Earlier than asking for extra Headcount and sources, groups most exhibit why they can not get what they need executed 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 worth 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" in opposition to 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.
