Feb 26 (Reuters) - Block on Thursday said it will cut over 4,000 jobs, nearly half its workforce, as part of an overhaul to embed artificial intelligence across its operations, sending shares of the payments firm up 25% in after-hours trading.
The layoffs signal how the AI boom is translating from hype into workforce changes, fueling long-held concerns among workers and economists that the technology could eliminate roles even as it boosts productivity and profits.
"Intelligence tools have changed what it means to build and run a company. We're already seeing it internally. A significantly smaller team using the tools can do more and do it better," CEO Jack Dorsey said in a statement.
"I don't think we're early to this realization. I think most companies are late," he added.
AI-DRIVEN OVERHAUL
In a post on social media platform X, Dorsey said Block opted for a single deep round of cuts instead of multiple smaller layoffs over time. He said a smaller company would also give it space to grow the business the right way, instead of constantly reacting to market pressures.
Investors have been rewarding companies that show AI-driven cost savings, and the sharp workforce reduction signals the scale at which the technology is starting to translate into lower expenses and higher margins in some industries.
The layoffs represent "a seminal moment" in the AI era, offering a glimpse into how the technology may fundamentally reshape the corporate world, analysts at Evercore ISI wrote in a note.
The company said it expects to incur roughly $450 million to $500 million in restructuring charges.
Dorsey said he expects a majority of companies to reach the same conclusion Block did and make similar structural changes. "I'd rather get there honestly and on our own terms than be forced into it reactively."
Analysts at Truist said the stock was likely surging on hopes of better-than-expected 2026 margins as a result of the workforce reduction.
EARNINGS MOMENTUM
Block posted an adjusted profit of 65 cents per share in the three months ended December 31, compared with 47 cents a year earlier.
Gross profit grew 24% in the quarter, driven by a 33% surge in the Cash App business, which enables peer-to-peer mobile payments.
Block said it believes it can sustain Cash App's strong gross profit growth and continue accelerating Square's gross payment volume over the next three years.
For the first quarter, Block forecast gross profit would rise 22% from a year earlier to $2.80 billion.
It also slightly raised its 2026 gross profit growth forecast to 18% from a preliminary view of 17%, while saying it continues to take a "prudent approach" towards both its quarterly and full-year outlook.
The results come as consumer spending remains resilient despite elevated interest rates, sustaining transaction volumes across the payments sector.
The results cap a broadly upbeat holiday-quarter reporting season for the payments sector, with Visa and Mastercard also posting solid results.
(Reporting by Manya Saini and Arasu Kannagi Basil in Bengaluru; Editing by Tasim Zahid)
