Jack Dorsey Fires Half of Block's Workforce, Says Every Company Will Do the Same Within a Year

"Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes. I'd rather get there honestly and on our own terms than be forced into it reactively."
Jack Dorsey, letter to shareholders, February 26, 2026

What he said / What we found

Claim: AI tools have changed what it means to run a company, justifying cutting 4,000 jobs
Reality: Block's gross profit grew 24% last quarter - this is a profitable company trimming headcount to boost margins, not a firm forced to restructure by technology
Claim: The majority of companies will make similar cuts within a year
Reality: Oxford Economics, Yale Budget Lab, and Forrester Research all say firms are not replacing workers with AI at scale - and 55% of employers who tried already regret it

The Claim

On Thursday evening, Jack Dorsey posted a memo to X that began with a sentence no one in his company wanted to read: "We're reducing our organization by nearly half, from over 10,000 people to just under 6,000."

The Block co-founder and CEO didn't blame a downturn. He didn't cite competitive pressure. He pointed directly at AI.

"Intelligence tools have changed what it means to build and run a company," Dorsey wrote. "A significantly smaller team, using the tools we're building, can do more and do it better. And intelligence tool capabilities are compounding faster every week."

He went further than any major CEO has gone before. Not only was Block cutting 40% of its workforce, Dorsey predicted this would become the norm. Most companies, he wrote, are "late" - and within 12 months, the majority will reach the same conclusion.

The severance terms were generous: 20 weeks of base pay plus one week per year of tenure, equity vested through the end of May, six months of healthcare, corporate devices, and a $5,000 transition fund. Dorsey acknowledged the human weight of the decision. "You built what this company is today," he told departing employees. "That's a fact that I'll honor forever."

Then the market reacted. Block shares surged roughly 25% in after-hours trading, closing near $67 - the largest single-day gain in the company's history.

Empty office desks after mass layoffs Block's workforce will shrink from over 10,000 to just under 6,000 - a return to pre-pandemic headcount levels.

The Evidence

Block's financials tell a different story

Dorsey framed the cuts as forward-looking transformation. The numbers suggest something more conventional: a healthy company improving for margins.

Metric	Q4 2025	Q4 2024	Change
Gross profit	$2.87B	$2.31B	+24.3%
Adjusted EPS	$0.65	$0.47	+38.3%
Cash App gross profit	$1.83B	$1.38B	+33.1%
Cash App monthly actives	59M	-	growing
Adjusted operating margin	20%	17%	+300bps
Revenue	$6.25B	$6.03B	+3.6%

This isn't a company in crisis. Gross profit grew 24%, Cash App - the core business - surged 33%, and adjusted operating margins expanded by three full percentage points. The "intelligence tools" narrative is layered on top of a business that was already performing well.

Block has indeed invested in AI. Its open-source coding agent Goose is a real product with real adoption - it can build projects, execute code, run tests, and interact with APIs autonomously. But there is no public evidence that Goose or any other AI tool has provably replaced the output of 4,000 employees. Dorsey's letter asserts transformation. It does not prove it.

Block's Goose AI agent - the open-source tool Dorsey credits with changing how his company works Block's open-source Goose agent can write code and run workflows, but no public data shows it can replace 4,000 employees.

Economists are not buying it

The reaction from labor economists was swift and skeptical.

Claudia Sahm, chief economist at New Century Advisors, cautioned that "I would not extrapolate from Block to the whole U.S. economy." She called the discussion about AI's impact "healthy" but resisted the apocalyptic framing.

Joseph Brusuelas, chief economist at RSM, was more direct. He characterized the layoffs as "a function of lax judgment during a period of rapid expansion and the retrenchment that follows," adding that the move "does not signal risk to the broader U.S. labor market." In other words: Block over-hired during the pandemic boom, and AI is a convenient narrative for the correction.

Anton Korinek, an economist focused on transformative AI, acknowledged that "AI capabilities have advanced rapidly in the past few months" - but advancement in capability isn't the same as proven workforce replacement at scale.

The regret data

Perhaps the most damning counter-evidence comes from Forrester Research, which found that 55% of employers already regret AI-driven layoffs. The reason is straightforward: companies are cutting staff based on promised future AI capabilities, not proven ones. Forrester's research shows that even advanced AI agents currently achieve only a 58% success rate on single-step tasks. For multi-step tasks requiring critical thinking and nuanced judgment, that rate drops to roughly 35%.

More than half the companies that tried what Dorsey is now doing at scale have already concluded it was a mistake. Some are quietly rehiring offshore at lower cost rather than admitting the technology underperformed.

Claim	Reality
AI tools can replace 4,000 workers	No public evidence Block's AI output matches 4,000 FTE
Most companies will follow within a year	55% of employers who tried already regret it (Forrester)
This is transformation, not cost-cutting	Gross profit up 24%, margins expanding - classic margin optimization
Intelligence tools are "compounding weekly"	AI agents succeed on 58% of single-step tasks (Forrester)

What They Left Out

Dorsey's memo was carefully constructed. What it omitted matters as much as what it said.

He didn't mention that Block's workforce ballooned during the pandemic era, growing from roughly 5,000 employees in 2020 to over 10,000 by 2022. The company isn't shrinking to an unprecedented size - it's returning to its pre-pandemic headcount. Framing a correction as an AI revolution is a choice.

He didn't reference the broader data on AI-attributed layoffs. As we reported earlier this week, Challenger, Gray & Christmas tracked 54,836 AI-attributed job cuts in 2025 - but that figure represents just 4.5% of total U.S. layoffs. The other 95.5% had nothing to do with AI. Oxford Economics concluded that "firms don't appear to be replacing workers with AI on a significant scale" and suggested companies use AI attributions because they "convey a more positive message to investors."

He also did not mention that 59% of companies admit they emphasize AI's role in layoffs specifically because it "resonates better with stakeholders than citing financial constraints." A Harris Poll found that 74% of CEOs globally fear losing their job within two years if they can't show AI success. When your career depends on appearing AI-forward, as we explored in the CEO productivity paradox, every restructuring becomes an AI story.

And he did not address what happens next. When Spotify restructured around AI and Microsoft explored replacing middle management with AI agent swarms, the headlines were dramatic. Neither company has published follow-up data showing that AI actually absorbed the displaced work. The announcements are loud. The evidence is quiet.

The Verdict

Jack Dorsey made the boldest AI-workforce claim any major CEO has made to date. He did not just cut jobs - he predicted an industry-wide reckoning within 12 months. Wall Street loved it. The stock surged 25%.

But the claim doesn't survive contact with the evidence. Block is a profitable, growing company that over-hired during the pandemic and is now correcting. Its AI tool Goose is real but unproven as a workforce replacement at scale. The economists are skeptical. The Forrester data on employer regret is damning. And the 12-month prediction - that most companies will follow suit - has no empirical basis.

Dorsey's memo was not a research paper. It was a shareholder letter. And shareholder letters are optimized for one audience: the market. The market responded exactly as intended.

The 4,000 people who lost their jobs on Thursday are real. Whether AI actually performs their work - or whether this was a margin play dressed in the language of transformation - is a question Dorsey chose not to answer.

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