All NewsFebruary 28, 2026

Block’s layoffs aren’t the AI warning shot you think they are

Square and Cash App parent Block (XYZ) made history on Thursday when it announced it would lay off 40% of its 10,000 employees, part of a bet that CEO Jack Dorsey said is related to “a new way of working which fundamentally changes what it means to build and run a company.”

Immediately, shares of the company jumped 20% in the after-hours trade, a sign that Wall Street was cheering “the largest workforce reduction as a share of total employees in the S&P 500.” And what gave the moment gravity wasn’t just the sheer scale of the layoffs; it was the implication that the company is doing well. In Dorsey’s own email to staff, he says, “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.” He says AI is the difference-maker.

Block’s AI layoffs: The first in a series of labor dominoes?

It feels like a “Citrini moment,” a foreboding of the creative destruction set to be unleashed by Corporate America waking up to AI’s potential. You can sense the scores of company insiders and executives taking this as permission to conduct similar downsizings under the guise of technological transformation.

Only, if that’s the case, Block is a terrible company to make it — unless you want “AI” to become the latest buzzword used to excuse managerial incompetence.

In case it has been lost in the buzz: Block is down 72% over the last five years (while the S&P is up by almost 80%); it is still down on a year-to-date basis even after today’s bump. And that years-long decline is louder than a one-day pop. For the most part, it’s the result of pandemic-era over-hiring, the blind pursuit of unpromising verticals like “bitcoin mining,” and overspending on vanity ventures — like a $68 million company anniversary party. (Yes, seriously.)

Maybe that’s the problem is that, all along, there has been ridiculousness. That’s especially the case in software. I don’t know why Block had over 10,000 employees, but it did.

But if the conclusion is that AI is the reason for cutting its workforce, today’s events demonstrate that investors — like with crypto, robotics, and other largely misunderstood trends before — will let you substitute reality for more complex truths.

In some cases, they will reward it, too. Then, the market would know that it’s not so much about over-hiring, business plans, or overspending on non-necessities. Instead, it’s about this new thing that is actually good (and which is, still, not critically understood.)

But in the example laid out by Block, where AI makes things more efficient, I still beg why it wouldn’t make more logical sense that 10,000 employees on lean teams with AI could be less powerful and promising than … an organization 60% of that size and scale with the same tools. I’m sure every company has some complicated argument for why — maybe something about focus or meeting customer needs.

Related: What are layoffs & how do they work? Everything you need to know

Uninformed AI speculation is moving markets, but should it be?

Again, as we’ve expounded upon many times before in TheStreet Daily, it’s not to say that AI doesn’t have disruptive potential. It’s to say there’s a misalignment between what is possible now and what might be possible in the future.

Increasingly, it seems that the problem isn’t just that smart people will allow themselves a degree of optimistic speculation in making the case for the technology, leaping over explanations of how we will amass the level of critical infrastructure impossibly quickly. It’s now also that the market must learn to distinguish what is real from what is fake when it comes to the disruptive potential of AI, and the timescale over which those disruptions are likely to occur.

Those in the financial industry have gone to great lengths to justify the market’s many contradictions, so it might be prudent to carefully examine the second-order effects that could await if business leaders take Block’s example. In any case, those are likely to be more real than anything else.

But since none of that will matter to executives who have seen the example set by others, maybe we can at least hope they will join in the fairly respectable way in which Block conducted its layoffs.

20 weeks of pay, plus one week per year of tenure, equity vests through May, corporate devices, and $5,000 to “put towards whatever you need” would be a great consolation for employees if it’s all going to zero anyways.