A tech CEO just fired 4,000 of his own employees, posted the reason online for everyone to read, and then watched his company’s stock price jump 22% the same night.
On February 26, 2026, Jack Dorsey, the CEO of Block Inc (the fintech company behind Square, Cash App, and Afterpay), announced that the company would cut 40% of its entire workforce. Over 4,000 people lost their jobs. The headcount drops from more than 10,000 to just under 6,000 people. The reason he gave was simple. AI tools now let a smaller team do the same work that a much larger one used to do.
Dorsey argued that advances in AI and smaller, flatter teams are changing how companies are built and run. “Intelligence tools have changed what it means to build and run a company,” he wrote. “A significantly smaller team can achieve the same or more.”
He also addressed severance directly. U.S. employees losing their jobs will receive 20 weeks of base salary plus one additional week for every year they worked at the company. That sits above what many other tech companies offered during their own layoff rounds.
Dorsey Also Admitted He Made a Big Mistake
After he posted the memo, people pushed back. They pointed out that Block hired a lot of people during the COVID-19 pandemic and then struggled to stay lean. Critics said the layoffs were about fixing that mistake, not about AI.
Dorsey agreed with part of that. He wrote on X: “Yes, we over-hired during COVID because I incorrectly built 2 separate company structures (Square and Cash App) rather than 1, which we corrected mid-2024.”
That was a rare admission from a tech CEO. Most executives do not publicly say they built their company wrong. However, Dorsey held firm on the bigger point. He said, blaming only the over-hiring misses the full picture. AI, he argued, had genuinely changed how many staff a company needs, and Block had already seen that change from the inside.
Block Was Actually Doing Well When This Happened
Here is the part that surprises most people. Block was not in financial trouble when Dorsey made this call. The company released its Q4 2025 earnings the same day as the layoff announcement, and the numbers were strong.
Block made $2.87 billion in gross profit in just the last three months of 2025. That was 24% more than in the same period the previous year. Cash App alone grew 33%. For the full year 2025, Block brought in $10.36 billion in gross profit, up 17% from 2024. For 2026, Dorsey raised expectations again, guiding for $12.2 billion.
So this was not a company cutting jobs to survive. This was a growing company choosing to run lean while it still had the strength to do so.
Some Experts Say AI Is Not the Whole Story
Not everyone accepts the AI explanation at face value. Bloomberg reported that Block’s cuts “aroused suspicions of AI-washing.” That term refers to companies that use AI as a convenient headline to cover decisions that are really about cutting costs or fixing past mistakes.
Block’s stock had already fallen roughly 40% since the start of 2025, before the layoff announcement. That decline had nothing to do with AI. It reflected business struggles and a bloated structure. Forbes argued plainly that AI tools in 2026 are not capable of replacing 4,000 skilled fintech workers, and that the real drivers were over-hiring and poor structural choices.
Harvard Business Review added an important nuance. Their research found that companies are laying off workers because of AI’s potential, not necessarily its current performance. HBR reported that the job losses are real, even though many companies are still waiting for AI to fully deliver on its promises. Workers are paying the price today for a technology shift that may take years to fully land.
The distinction matters for workers. If companies are cutting jobs in anticipation of AI, not because AI has already proven it can do those jobs, then millions of people are losing their livelihoods based on a bet, not a certainty.
What a Smaller Block Looks Like Going Forward
Dorsey has been clear about the direction. Block will invest in hiring senior AI engineers while cutting general headcount. The company wants flatter structures, fewer layers of management, faster decisions, and smaller teams doing more work with better tools.
Block’s 2026 gross profit guidance of $12.2 billion, delivered alongside the layoff announcement, told investors the math works. The company raised its full-year outlook at the same time it announced the cuts. That combination: cutting costs while raising expectations produced the sharp stock reaction.
Reuters confirmed that Block guided for Q1 2026 gross profit of $2.80 billion, up 22% year over year, demonstrating that the financial trajectory is positive and accelerating even as headcount falls.
The Bigger Picture for Workers and Companies Alike
Dorsey’s public memo forced a conversation that most corporate executives prefer to avoid. AI is changing how much human labour companies actually need to operate. That change is not theoretical or years away. It is happening now, inside real companies, affecting real jobs.
The honest version of that story includes both parts. AI tools do increase output per worker. Several industries are seeing real productivity gains. At the same time, over-hiring, poor structural decisions, and investor pressure all played a role in where Block found itself before this announcement.
Workers across the tech sector, and well beyond it, now have a concrete example to study. A company with rising revenue and strong profits chose to cut nearly half its staff. The stock went up. Dorsey said most companies will follow.
That is the world workers are navigating right now. Acknowledging it clearly matters more than debating whether to call it AI or something else.
