Analyst: Block's Layoffs an AI Smokescreen
Author Cory Doctorow is calling out tech firms like Block for using an "AI bet" as a cover for massive layoffs. He argues the cuts are more likely a response to business contractions, like crashing crypto prices and post-lockdown slowdowns in cloud services, rather than a strategic pivot to AI.
Block's workforce reduction, cutting over 4,000 jobs, is framed by CEO Jack Dorsey as a strategic move toward an AI-first model. The company's headcount will shrink from over 10,000 to under 6,000. This decision comes despite a reported 24% year-over-year increase in gross profit for the fourth quarter of 2025. Jack Dorsey has openly admitted to over-hiring during the COVID-19 pandemic, a factor that some analysts believe is a more significant reason for the layoffs than the company's pivot to AI. The company's employee count grew from about 3,800 in 2019 to over 10,000 by 2025. Some critics view the AI narrative as a convenient cover for correcting this "insane COVID overhiring binge." The company is now targeting a gross profit of over $2 million per employee, a significant increase from the pre-pandemic figure of approximately $500,000. This new efficiency target suggests a strong focus on improving profitability and operational leverage, with or without the influence of AI. The layoffs and the accompanying AI narrative have been met with a positive response from Wall Street, with Block's stock price surging over 20% following the announcement. This market reaction may encourage other companies to adopt a similar justification for workforce reductions, regardless of their actual AI implementation progress. While Block's Cash App has seen a 33% surge in gross profit, the company's Bitcoin-related ventures have faced regulatory challenges. The restructuring may disproportionately affect these cryptocurrency divisions as the company seeks to streamline its operations. Some experts are skeptical about the immediate impact of AI on workforce needs, pointing out that the technology is still developing and often requires significant human oversight. For instance, Klarna, another fintech company, previously touted AI's ability to replace customer service agents but later had to rehire staff due to the limitations of the technology. The layoffs at Block are part of a broader trend in the tech industry, with many companies announcing significant job cuts and citing AI as a contributing factor. However, the scale of Block's reduction—nearly half of its workforce—is particularly notable.
