Block cut 4,000 employees yesterday—40% of its workforce—in the largest AI-driven layoff by percentage in tech history. The company’s stock surged 24% in extended trading. Jack Dorsey’s message to other CEOs: “Your company is next.” This isn’t cost-cutting disguised as innovation. Block is profitable and growing. Q4 earnings beat expectations. This is Dorsey betting that AI can genuinely replace 40% of human workers, and the market rewarding him for it. When market mechanics incentivize mass AI replacement, every CEO faces pressure to follow.
The Numbers Tell the Real Story
Block reduced headcount from over 10,000 to just under 6,000 in a single move on February 26, 2026. Not gradual attrition. One deep cut. The company reported Q4 2025 revenue of $6.25 billion and adjusted earnings of $0.65 per share, beating expectations despite the planned cuts. Gross profit grew 24% year-over-year. This is a profitable, growing company eliminating 40% of its workforce because it believes AI makes them redundant. The market loved it. Shares jumped 24% after hours, adding billions in market cap overnight.
Dorsey’s shareholder letter didn’t hide behind corporate euphemisms. “Intelligence tools have changed what it means to build and run a company,” he wrote. “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.” Translation: AI productivity gains justify eliminating 4,000 jobs. The question isn’t whether this happened. The question is whether it’s true—or whether AI just provides better PR than “we wanted to boost profit margins.”
Market Incentives Drive AI Replacement, Not Technology Readiness
Why did Block’s stock surge 24%? Labor costs are the largest expense for most tech companies. If AI can reduce headcount 40% without harming revenue growth, every CEO has a fiduciary duty to shareholders to consider it. Block just proved the market rewards this move. When Dorsey says “your company is next,” he’s not predicting the future—he’s creating it. First movers get stock boosts. Laggards get punished for inefficiency. The competitive dynamics become self-fulfilling.
Block isn’t the only company cutting staff in 2026. Amazon eliminated 16,000 corporate roles in January. Meta cut 1,500 from Reality Labs. eBay laid off 800 people. But Block stands out. Amazon’s cuts represent 2-3% of their workforce. Meta’s Reality Labs cuts hit 10% of that division. eBay trimmed 6%. Block cut 40%. The difference isn’t just scale—it’s narrative. Block explicitly frames this as an “AI-native reset.” The company provided specific examples: AI-powered insights in Square’s seller dashboard, real-time recommendations, flatter organizational structure enabled by AI coordination. Whether those examples justify 40% headcount reduction is debatable. Whether the market buys the narrative is settled.
Is This AI Capability or AI-Washing?
Here’s the uncomfortable question: Can AI actually do what 4,000 people were doing, or is “AI-native” just better branding than “cost reduction”? The evidence cuts both ways. Dorsey points to specific use cases—Square dashboard AI giving sellers “real-time insights on menus, staffing, and customer behavior, with clear recommendations they can act on in seconds.” That’s real AI application. But is it 40% of workforce real?
Block employees aren’t convinced. At a recent staff meeting, one employee said “morale is probably the worst I’ve felt in four years” and “the overarching culture at Block is crumbling,” according to Inc. reporting on internal communications. The timing compounds the problem. Block implemented mandatory AI policies alongside layoffs. Every employee must send Dorsey a weekly email detailing their five latest accomplishments, which he then uses AI to summarize. AI fluency is formally integrated into performance reviews. Employees see this clearly: AI isn’t augmenting their work—it’s justifying their replacement.
The truth is probably somewhere between Dorsey’s AI utopia and employee skepticism. AI can automate routine tasks. AI can enhance productivity. AI can eliminate some roles. But 40%? That’s aggressive. The more likely scenario: Block wanted to cut headcount for profit margin reasons, and AI provides better narrative cover than “we prioritized shareholder value over employees.” The market doesn’t care which interpretation is correct. The stock surged either way.
Developer Job Security Just Changed
If Block can cut 40% citing AI, what jobs are safe? The answer depends on role, seniority, and specialization. Industry forecasts suggest AI could displace 50% of jobs by 2027 according to some projections, though the World Economic Forum estimates a more nuanced picture: 83 million jobs displaced but 69 million new roles created. Software developers face uneven risk. Junior developers handling routine coding tasks? 60-70% automation potential. Senior developers and architects handling complex systems, business context, and stakeholder management? Much lower risk. AI augments those roles but doesn’t replace the judgment required.
Interestingly, software developer jobs are still projected to grow 17.9% between 2023 and 2033 despite AI automation. The catch: Entry barriers rise as junior roles shrink. “AI fluency” becomes mandatory, as Block’s policy makes explicit. Job security no longer depends solely on coding ability. It depends on whether AI can replicate your specific value. The pressure moves everyone upmarket—specialize, solve complex problems, demonstrate irreplaceable insight. The alternative is competing with AI on tasks AI handles adequately.
What Happens Next
Dorsey explicitly stated he believes “the majority of companies will reach the same conclusion within a year and make similar structural changes.” That’s not idle speculation. It’s a timeline. When a CEO cuts 40%, gets a 24% stock surge, and publicly predicts others will follow, competitive pressure builds. Watch fintech companies. Watch SaaS companies with large engineering and support teams. If profitable companies start citing “AI-native restructuring” and markets reward them, the race begins.
The precedent Block set isn’t just about workforce reduction. It’s about market tolerance. Dorsey tested whether investors would accept 40% AI-driven cuts at a profitable company. They didn’t just accept it—they celebrated it. That signal matters more than Block’s specific AI capabilities. It tells every CEO: The market will reward aggressive AI replacement narratives, even at 40% scale. The question isn’t whether AI is ready to replace half your workforce. The question is whether your stock price needs the boost.
Who’s left standing when the music stops? Developers who can do what AI can’t. Workers who demonstrate value AI doesn’t replicate. Companies that balance efficiency with culture and long-term capability building. Everyone else becomes a case study in the next wave of “AI-native resets.” Block just showed the playbook. The market just validated it. The timeline is “within a year.” Get ready.
