Jack Dorsey's Block to lay off 4000 employees as the AI era arrives

Dorsey’s move to reduce Block’s headcount from more than 10,000 to just under 6,000 won favour with the markets, sending the share price of the firm behind Square and Cash App soaring by as much as 24% in extended trading on Thursday.

Explaining the decision in a letter to shareholders, Dorsey writes: “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. And intelligence tool capabilities are compounding faster every week.”

While it has long been predicted that the rise of AI will have seismic effects on the job market, the size of the reductions at Block coupled with Dorsey’s explicit reasoning mark a shift in the debate.

And Dorsey predicts that Block will soon be followed by others: “I don’t think we’re early to this realisation. 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. I’d rather get there honestly and on our own terms than be forced into it reactively.”

In the short term, Block expects to incur charges of $450 million to $500 million, consisting primarily of severance payments, employee benefits and noncash expenses related to share vesting.

Dorsey emphasises that the job cuts are being made from a position of strength, coming as Block reports fourth quarter adjusted earnings per share of 65 cents on revenue of $6.25 billion. Gross profit increased 24% year-on-year to $2.87 billion.