Feb 27 (Reuters) - Block shares soared more than 16% on Friday after the fintech firm announced it would nearly halve its workforce as part of an overhaul to embed artificial intelligence tools across its operations.
The layoffs are the most visible signs of how the industry is navigating the impact of AI, with Block's CEO, tech billionaire Jack Dorsey, warning that most companies were "late" to realize the emerging technology's potential.
"At its core, it's about how some companies may be run going forward – not just doomsday headcount reductions, but also enabling higher ROI investments in growth and FCF," analysts at Evercore ISI wrote, referring to free cash flow.
Accelerating AI adoption is helping companies to cut jobs in divisions most exposed to automation. Economists at Goldman Sachs have estimated that AI was responsible for job losses amounting to a 5,000 to 10,000 hit to average monthly job growth in the industries most exposed to it in 2025.
"The long-term impact of dramatically reducing staff and betting on AI productivity gains is uncertain... In the near term, the decision should materially boost margins, but it is unclear whether that can be maintained," Morningstar analyst Brett Horn said.
Block said on Thursday it expects an adjusted operating margin of 26% for the year, compared with the 20% it reported in 2025.
The stock was on pace for its biggest single-day jump since November 2022, if the gains hold.
PANDEMIC-ERA OVERHIRING
Block was among the many companies that aggressively hired during the pandemic as the use of digital payments and online commerce spiked.
"In Block's case, this looks like a mix of AI efficiency gains and an overdue clean-up of corporate bloat," said Matt Britzman, an analyst at Hargreaves Lansdown.
The company's workforce jumped from about 3,800 employees in 2019 to more than 10,000 in 2025 as it battled intensifying competition in its payments and buy-now-pay-later segments.
"While the RIF (reduction in force) is large, it does bring Block's headcount back toward pandemic-era levels, making it a standout in gross profit per employee, well ahead of its peers including Visa," J.P. Morgan analysts said.
(Reporting by Utkarsh Shetti and Manya Saini in Bengaluru; Editing by Sriraj Kalluvila)
