AI Excuse or Real Revolution? Block's 4,000 Layoffs Trigger 20% Stock Jump

When Firing 4,000 People Makes Your Stock Soar 20%

Jack Dorsey's Block just announced it's laying off 40% of its workforce—more than 4,000 people. The reason? Artificial intelligence, apparently. Wall Street's reaction? The stock jumped 20% after hours.

In a memo to staff that Dorsey also shared on X, he insisted this wasn't about financial trouble. "Our business is strong," he wrote. Instead, he pointed to "intelligence tools we're creating and using, paired with smaller and flatter teams" as enabling "a new way of working."

Departing employees will receive 20 weeks of salary plus one week per year of tenure, equity vested through May, six months of healthcare, and $5,000 for transition support.

The Convenient AI Excuse

The timing raises eyebrows. Just five months ago, Dorsey threw a $68 million party for Block employees featuring Jay-Z, Soulja Boy, and T-Pain. The extravaganza caused the company's operating expenses to spike. Now suddenly AI makes nearly half the workforce redundant?

The pattern extends beyond Block. Salesforce and Workday have seen similar stock bumps after announcing AI-justified layoffs. But critics aren't buying it.

"Given that effective AI tools are very new, and we have little sense of how to organize work around them, it is hard to imagine a firm-wide sudden 50%+ efficiency gain that justifies massive organizational cuts," Wharton professor Ethan Mollick said on LinkedIn.

The Real Story: Corporate Bloat Meets Wall Street Rewards

Block's headcount tripled between 2019 and 2022. Dorsey has previously acknowledged overbuilding, including creating separate organizational structures for Square and Cash App rather than integrating them.

The concerning pattern is clear: Wall Street rewards CEOs who make steep cuts and attribute them to AI. This creates perverse incentives for management teams to follow suit—regardless of whether their AI claims are legitimate.

Other tech companies are watching. If you can blame AI for cleaning up years of corporate bloat while getting rewarded with a stock price surge, why wouldn't you?

The White-Collar Canary in the Coal Mine

Whether AI is genuinely replacing large swaths of knowledge work or companies are using it as convenient cover for long-overdue restructuring, the message to white-collar workers is becoming clear: your job security depends increasingly on whether your CEO can sell a compelling AI narrative to Wall Street.

The most troubling aspect isn't the layoffs themselves—companies sometimes need to restructure. It's the incentive structure that rewards dramatic cuts dressed up as technological innovation, potentially encouraging copycat moves across industries.