Fintech firm Block recently revealed plans to lay off 4,000 of its 10,000 employees, attributing this decision to increased productivity driven by artificial intelligence (AI).
In a letter to shareholders released Thursday, CEO Jack Dorsey stated, “Intelligence tools have redefined what it means to build and operate a company. We are already experiencing this shift within our organization; a considerably smaller team utilizing the tools we are developing can accomplish more efficiently. Moreover, the capabilities of these intelligence tools are advancing rapidly each week.” Block owns popular online payment solutions, including Square and Cash App.
Investors seem optimistic about Dorsey’s assertion that job cuts and a stronger focus on AI will enhance profitability. As a result, shares surged by over 20% in pre-market trading on Friday.
Block’s layoffs reflect broader concerns about job losses related to increasing AI adoption. According to Goldman Sachs, the accelerated implementation of AI might raise unemployment rates this year, estimating that AI has already caused monthly net job losses ranging from 5,000 to 10,000 last year. A study from the Massachusetts Institute of Technology revealed that AI could potentially replace nearly 12% of the U.S. workforce.
The technology sector has been significantly impacted, with employees at various tech companies also facing layoffs. For instance, Marc Benioff’s Salesforce cut around 4,000 positions last year, indicating a need for fewer people due to AI’s effectiveness.
In his announcement, Dorsey emphasized that the decision to nearly halve Block’s workforce was not indicative of financial distress; in fact, the company had performed well, surpassing Wall Street expectations with $6.25 billion in total revenue for the fourth quarter.
Dorsey mentioned on X that he had two options: to gradually reduce the workforce over time or to be transparent about the current situation and take immediate action. He stated, “Repeated rounds of layoffs harm morale, focus, and the trust that customers and shareholders place in our leadership.”
During Thursday’s earnings call, Block executives noted that the company had been relying on AI for several years and that while some AI initiatives were “nearly fully rolled out,” others were still developing.
Earlier this month, following the previous layoffs in February, remaining employees reported declining morale and increased demands for the use of generative AI, as noted by Wired.
Wired also highlighted an employee complaint presented to Dorsey during a company-wide meeting, expressing that “morale is probably the worst I’ve felt in four years” and indicating that “the overall culture at Block is crumbling.”
Dorsey acknowledged the risks associated with the layoffs, as mentioned in his communications to shareholders and on X. In the company’s latest 10-K filing, he outlined potential pitfalls of relying on AI. “Our success in operating with a smaller workforce will depend partly on the effectiveness, reliability, and adoption of our proactive intelligence and AI tools,” the filing stated. “These technologies may not function as expected, may demand more time or resources for effective implementation, could introduce operational or cybersecurity risks, or might fail to enhance productivity and maintain operational efficiency as anticipated.”
Stephen Innes from SPI Asset Management commented, “For years, we debated whether AI would affect jobs marginally. Now, we have a public case study wherein the CEO clearly states that intelligence tools have transformed the landscape of company management.”
Innes further noted, “Numerous large employers have announced tens of thousands of job cuts recently, with some downplaying the connection to AI. In contrast, Block has been transparent about it.”
