Block Slashes 40% of Jobs for AI — Stock Soars as Wall Street Embraces the Machine Revolution

Block delivered a quarter that, on the surface, looked solid. But the market isn’t just reacting to earnings — it’s reacting to a structural shift. Shares surged more than 20% in the after-hours session after the company paired a beat-and-raise quarter with a dramatic announcement: it will cut more than 40% of its workforce, shrinking from over 10,000 employees to just under 6,000. CEO Jack Dorsey framed the move explicitly around artificial intelligence, arguing that “intelligence tools” now allow significantly smaller teams to operate more effectively. In a market already rattled by growing anxiety over AI’s impact on white-collar jobs — amplified earlier in the week by the Citrini Research note — this was not just a company-specific headline. It was a macro signal.

From a pure results standpoint, Block’s Q4 numbers were strong. Adjusted EPS came in at $0.65, in line with consensus, on revenue of $6.25 billion versus estimates around $6.22 billion. More importantly, gross profit — the company’s preferred performance metric — grew 24% year over year to $2.87 billion, comfortably ahead of expectations. Adjusted operating income rose 46% year over year to $588 million, while adjusted EBITDA reached $930 million. Adjusted diluted EPS grew 38% year over year, reflecting meaningful operating leverage.

Cash App was the standout. Gross profit in the segment surged 33% year over year, well ahead of Street expectations closer to the mid-20% range. Monthly transacting actives reached 59 million, up sequentially by roughly 1 million users, while primary banking actives climbed 22% year over year to 9.3 million. Consumer lending momentum was particularly strong, with origination volume up 69% year over year and Cash App Borrow up more than 200%. Management emphasized that primary banking users generate nearly 10x the gross profit of peer-to-peer only actives, reinforcing the strategy of deepening engagement over simply growing top-line users.

On the Square side, gross payment volume (GPV) grew 10% year over year, roughly in line with expectations, while gross profit growth of about 7% was modestly light versus consensus. However, early 2026 trends are improving, with quarter-to-date GPV growth accelerating to over 12% year over year. International GPV growth exceeded 20%, and food & beverage verticals showed particular strength. Morgan Stanley and Deutsche Bank both highlighted improving attach rates and better pricing flexibility, suggesting that Block is successfully expanding its total addressable market after a period of slower growth between 2022 and 2024.

Margins were another positive. Adjusted operating income margins expanded to roughly 20% in Q4, and management is now guiding to 26% margins in 2026 — a dramatic step-up. For the full year, Block now expects $12.2 billion in gross profit in 2026, representing 18% year-over-year growth, alongside $3.2 billion in adjusted operating income, up 54% year over year. Adjusted diluted EPS is projected at $3.66, also up 54%. First-quarter guidance calls for $2.8 billion in gross profit (22% growth) and $600 million in adjusted operating income.

But those numbers are almost secondary to the restructuring. The company expects to incur $450 million to $500 million in restructuring charges, primarily in Q1. Dorsey acknowledged that Block “over-hired during COVID,” building two parallel organizations for Square and Cash App that were later consolidated. More importantly, he framed the cuts as forward-looking, not defensive. The goal, he said, is to target over $2 million in gross profit per employee — roughly 4x pre-COVID efficiency levels. He explicitly stated that smaller teams using AI tools can “do more and do it better” and predicted that most companies will reach similar conclusions within the next year.

That language matters. This is not a typical cost-cutting program during a downturn. Block is essentially betting that AI-powered automation can sustain 18% gross profit growth while reducing headcount by 40%. Bank of America summarized the thesis succinctly: grow gross profit high-teens while dramatically cutting costs, powered by AI. Investors appear willing to give management the benefit of the doubt, with shares rallying sharply and multiple analysts upgrading the stock or raising price targets.

However, the broader implications are significant. The Citrini Research note earlier in the week triggered concerns that AI could accelerate displacement in white-collar industries, particularly in software and fintech. Block’s move gives that narrative credibility. This is one of the first major public companies to explicitly tie a workforce reduction of this scale to AI efficiency gains. If other companies with depressed stock prices see the market reward this move, the incentive to follow suit grows.

For software companies, the risk is twofold. First, if headcounts shrink meaningfully across corporate America, “seat-based” pricing models could face pressure. Second, if AI allows companies to consolidate tools or reduce layers of middle management, spending growth could slow even in an otherwise stable macro environment. The recent bounce in software stocks could therefore face renewed scrutiny as investors reassess demand durability in a world of AI-driven efficiency.

To be clear, Block’s fundamentals are not deteriorating. Gross profit growth is accelerating, Cash App engagement is improving, and margin expansion is material. Risk remains in lending, with management acknowledging higher portfolio losses in December and January, but cohorts are reportedly trending below targets more recently. Execution risk around such a large workforce reduction is real, but management argues smaller, “functionalized” teams will move faster.

The bottom line: Block delivered a strong quarter and raised guidance. But the stock’s explosive reaction reflects something larger. By cutting 40% of its workforce and explicitly crediting AI tools for enabling that move, Block has thrown fuel on an already smoldering debate about automation, employment, and the future structure of corporate America. Markets will be watching closely to see who follows — and what that means for the broader software and fintech landscape.