Block says AI will let it cut more than 4,000 jobs. Some argue that's not the whole story.

By Emily Bary

Block's 'audacious' move ignites debate over whether the company is using AI as an excuse to walk back reckless hiring

Block is the parent company of Square and the Cash App.

Block's stock is rocketing 16% after the company said that massive advancements in artificial intelligence are allowing it to cut more than 40% of its workforce. But some argue that the real story is a bit more complicated than that.

One big question in the wake of Block's (XYZ) job-cuts announcement is whether AI really is the cause of such widespread reductions in head count. For instance, Block's employee count swelled in the years since the COVID-19 pandemic began, going from under 4,000 at the end of 2019 to a recent figure over 10,000. The company, which houses Square and Cash App, will pare its workforce to below 6,000 employees.

"How much of this is using AI as a justification to unwind over-hiringduring the COVID-era?" Deutsche Bank analyst Nate Svensson asked in a note to clients.

See more: Block plans to lay off nearly half its staff in 'deliberate and bold' embrace of AI

The debate became so pronounced on X that Block CEO Jack Dorsey responded to one online critic who slammed his "managerial incompetence." Dorsey argued that he was wrong to hire too many people who ended up serving in redundant roles, but he also said he already "corrected" those mistakes more than a year ago.

Dorsey also argued that Block is already being run efficiently. The company has been trying to get more serious about profitability for several years, including streamlining organizational structures and focusing more on respected financial metrics.

CFO Amrita Ahuja told MarketWatch on Thursday that Block's management thinks the decision would enable it to serve customers better and with a greater emphasis on product velocity. "We would not do this" if it weren't for the company's customer focus, she said. "If we're delivering for customers, we're also delivering for shareholders."

Read: Why did AI 'science fiction' spur market panic? We asked a behavioral-finance expert to find out.

Bernstein analyst Harshita Rawat acknowledged the various puts and takes of Block's "audacious" move. On one hand, "someone can argue that Block is not exactly a poster child of an efficiently run company," noting "duplicate cost functions across Block" on a historical basis.

While Rawat didn't exactly get into these matter, the company has also made polarizing acquisitions and drawn criticism for other elements of its spending. For one, Block acquired buy-now-pay-later provider Afterpay in an all-stock deal valued at $29 billion that closed in 2022, but now Block itself is only worth $33 billion.

Last year, the company's third-quarter "in-person company event" for employees was so costly that the company had to disclose it as one of the reasons behind a $68 million increase in general and administrative expenses for that period.

But for all the criticism of Block's inefficiencies, the "head count actions cannot be explained by 'bloat'" as "that problem was somewhat solved from 2023-2025," Rawat added. After some adjustments, Block's gross profit per employee was $800,000 at the end of 2025, she said, above what peers like PayPal Holdings (PYPL) and Adyen (NL:ADYEN) showed. The company's guidance implies that the ratio could work out to $1.5 million in 2026, "exceeding the levels seen at large tech giants."

Elsewhere, analysts saw merit in the AI explanation. "Block is a tech-forward company that has invested meaningfully in internal AI tools, which is allowing them to take such a drastic action," Matthew Coad of Truist Securities said in a note to clients.

-Emily Bary

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02-27-26 1054ET