Fintech company Block has announced that it will lay off 4,000 of its 10,000 employees due to AI productivity improvements.
“The advent of intelligence tools has changed what it means to start and run a company,” Block CEO Jack Dorsey said in a letter to shareholders Thursday. “We’re already seeing that internally. The tools we’re building allow significantly smaller teams to do more and do better. And the capabilities of our intelligence tools are rapidly evolving every week.” Block is the parent company of online payment platforms such as Square and Cash App.
For now, investors appear encouraged by Mr. Dorsey’s claims that cutting jobs and increasing reliance on AI will boost profitability, analysts said. Shares rose more than 20% in premarket trading on Friday.
Mr. Block’s layoffs speak to greater concerns about job cuts due to the increased use of AI. Goldman Sachs said in February that unemployment rates could rise this year as the pace of AI adoption accelerates, estimating that the technology was already costing between 5,000 and 10,000 net jobs per month last year. A study released in November by the Massachusetts Institute of Technology found that nearly 12% of the U.S. workforce could already be replaced by AI.
The tech industry has been the hardest hit, and employees at other tech companies are also feeling the heat. Salesforce, led by Marc Benioff, cut about 4,000 jobs last year, and the CEO said that given the efficiency of AI, “We need to reduce headcount.”
Mr. Dorsey on Thursday insisted that Mr. Bullock’s decision to cut nearly half its workforce was not due to business difficulties, but that the company’s economic performance was actually strong. (Block beat Wall Street expectations for the fourth quarter, reporting total revenue of $6.25 billion).
Dorsey told X that there are two options. One option is to reduce headcount gradually over months or years, or to be honest about where we are and act now.
“Repeated cuts are destroying morale, focus, and customer and shareholder confidence in our leadership,” he wrote.
Block executives said on Thursday’s earnings call that the company has increased its reliance on AI over the years, noting that while some AI workstreams are “nearly fully deployed, others are still maturing.”
Block had already laid off hundreds of employees in early February. Wired reports that earlier this month, employees still with the company reported that employee morale was rapidly declining and that generative AI needed to be used.
Wired said it reviewed employee complaints submitted to Dorsey during a recent all-hands meeting and found that “morale feels like it’s probably the worst it’s been in four years” and that “Block’s overall culture is crumbling.”
In his message to shareholders, Mr. Dorsey acknowledged the risks of retrenchment at X. The company’s latest 10-K filing outlines how AI gambling could go wrong. “Our ability to successfully operate with a reduced workforce is expected to depend, in part, on the effectiveness, reliability, and deployment of proactive intelligence and AI tools,” the company said. “These technologies may not perform as expected, may require more time or expense to effectively implement, may pose operational or cybersecurity risks, or may not increase productivity and maintain operational efficiency as expected.”
“For years, we have been debating whether AI will squeeze jobs at the margins, and now we have a case study published where CEOs clearly state that intelligence tools have changed what it means to build and run a company,” Stephen Innes of SPI Asset Management told The Associated Press.
“Other major employers have announced tens of thousands of layoffs in recent months,” he said. “While some companies have downplayed the connection to AI, this was not the case with Block.”
