Jack Dorsey made the loudest case yet that AI is already replacing jobs

The tech industry has spent the last couple years debating whether artificial intelligence will actually eliminate jobs at scale or simply be used as an excuse for companies to engage in mass layoffs.

Block just firmly planted its flag.

Jack Dorsey, co-founder and CEO of the Square parent, announced Thursday that his company is cutting about 40% of its workforce, reducing head count from over 10,000 to just under 6,000. And he was explicit about the reason, telling investors on Block’s earnings call that “intelligence tools” have fundamentally changed what it means to build and run a company.

Dorsey suggested the rest of corporate America is about to follow suit, predicting that the majority of businesses will reach the same conclusion within a year.

“Our business is strong,” Dorsey wrote in a post on X. “Gross profit continues to grow, we continue to serve more and more customers, and profitability is improving. But something has changed.”

Investors instantly embraced the message, sending the stock up about 25% in extended trading on Thursday, though the gains were muted a bit on Friday, with shares closing up 17%.

Block also provided an earnings forecast for the year that sailed past estimates, even as results for the past quarter were largely inline with expectations.

Morgan Stanley analysts upgraded Block to overweight, writing that AI-driven efficiencies should deliver increased profitability. Analysts at Goldman Sachs raised their price target, noting that the cuts would vault Block from middle of the pack to near the top in fintech workforce productivity. Wells Fargo kept its buy rating, calling the quarter “chock full of positive surprise.”

Block expects to take a $450 million to $500 million hit for restructuring costs, largely front-loaded in the first quarter, with the bulk of the cuts done by the middle of the year. Dorsey said he chose to act all at once rather than phase the cuts.

“Repeated rounds of cuts are destructive to morale, to focus, and to the trust that customers and shareholders place in our ability to lead,” he wrote.

The move dwarfs recent AI-linked cuts at Pinterest, CrowdStrike and Chegg, and lands as the debate over AI and jobs is consuming Wall Street.

Earlier this week, Citrini Research published a thought experiment that went viral titled, “The 2028 Global Intelligence Crisis” — a hypothetical memo set two years in the future warning that AI-driven layoffs could trigger a negative feedback loop of white-collar displacement, collapsing consumer spending and systemic financial damage.

While the report found its share of critics, notably from Citadel Securities, the argument that AI-based head count reductions would first show up at strong, profitable software companies has a real-world case study.

Block says it’s now aiming for north of $2 million in gross profit per head — roughly quadruple where that figure sat before Covid. Goldman noted that the cuts appear concentrated in engineering roles rather than revenue-generating or regulatory positions — consistent with Block leaning on its in-house AI platform, Goose, to replace that work.

Autodesk CEO Andrew Anagnost said on Friday that revenue per employee is the defining efficiency metric for management teams.

“We are absolutely looking at efficiency moving forward,” Anagnost told CNBC’s “Squawk on the Street.” “We are going to hire less people at Autodesk because of efficiency. We’re certainly seeing engineering efficiency because of AI.”

Still, not everyone is buying Dorsey’s explanation.

Block ballooned from about 4,000 employees in 2019 to nearly 13,000 during the pandemic, a fact that was cited by skeptics across social media after the cuts were announced. Dorsey acknowledged the overhiring on X, calling it a mistake he corrected in mid-2024. Goldman noted that the reduction effectively takes Block’s head count back to 2020 levels.

Dorsey previously went on another hiring spree when he ran Twitter. Elon Musk slashed roughly 80% of Twitter’s payroll within six months of buying the company, later renamed X, in 2022.

Analysts at Piper Sandler reiterated their underweight rating on Block after Thursday’s report, emphasizing that the company’s transaction losses increased to 18% of gross profit in the period from 14% in the prior quarter and 11% a year earlier.

“Bottom line, while the right sizing from XYZ is being well received by investors and should boost ST profitability, it seems like an extreme step, and we remain skeptical of XYZ’s longer term growth profile,” the analysts wrote.

WATCH: Block shares pop more than 20%, announces plan to reduce workforce by almost half