On February 26, 2026, Jack Dorsey fired nearly half his company, watched the stock soar, and told every other CEO in America that they were going to have to do the same thing. Soon.
Block, the fintech company behind Cash App, Square, and Afterpay, cut its workforce from over 10,000 employees to just under 6,000. Dorsey posted the note to staff publicly on X, told analysts on an earnings call that most companies were already late to this realization, and let the market respond. Block's shares jumped roughly 22% in after-hours trading, reversing a slide that had left the stock down 40% since January 2025.
What Dorsey Actually Said
Dorsey's shareholder letter was blunt: "The core thesis is simple. Intelligence tools have changed what it means to build and run a company. 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 ruled out financial distress as a factor. Block reported full-year 2025 gross profit of $10.36 billion, up 17% year-over-year. Q4 gross profit jumped 24%. Cash App surged 33%. For 2026, the company raised its earnings guidance to $3.66 per share, well above analyst expectations of $3.22.
"We're not making this decision because we're in trouble," Dorsey wrote. "Our business is strong."
Then came the line that generated the most external discussion: "I think most companies are late. 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."
On X, separately, he reduced the logic to a formula: "100 people + AI = 1,000 people."
The Internal Tool Behind the Numbers
What separates this from a generic "AI is changing everything" memo is Block's internal platform, called Goose.
Goose started as an engineering experiment roughly two years before the layoffs and had by February 2026 expanded across nearly every department. According to reporting, engineers using Goose were shipping approximately 40% more code per person than six months earlier.
On the analyst call, Dorsey pointed to a specific turning point: "Something happened in December of last year where the models just got an order of magnitude more capable and more intelligent, and it's really shown a path forward in terms of us being able to apply it to nearly every single thing the company does."
His target figure makes the ambition concrete. Block is aiming to generate more than $2 million in gross profit per employee, compared to roughly $500,000 per employee from 2019 to 2024. Whether that is achievable with 6,000 people and a set of AI tools is the central question the next few quarters will answer.
Affected employees received 20 weeks of severance plus one week per year of tenure.
The Skeptics Have a Strong Argument
The announcement landed in the middle of a months-long debate about whether companies were attributing layoffs to AI honestly or using it as a cover story for corrections they needed to make anyway. Block's own history gives the skeptics real ammunition.
The company's headcount ballooned from roughly 3,835 employees at the end of 2019 to nearly 13,000 at its 2023 peak. Block ran Square and Cash App as two parallel, largely duplicative corporate structures for years before consolidating them in 2024. Dorsey spent $68 million on a company-wide event five months before the layoffs. Just eleven months earlier, in March 2025, he laid off 931 people, with a memo that read: "None of the above points are trying to hit a specific financial target, replacing folks with AI, or changing our headcount cap."
Eleven months later, the AI framing had become the entire thesis.
Technology journalist Om Malik called it "classic narrative substitution" and noted that Dorsey's productivity target implies each remaining employee would produce 2.6 times what they did in 2025, a 160% jump in a single year. Wharton professor Ethan Mollick was similarly skeptical, writing on LinkedIn that "given that effective AI tools are very new, and we have little sense of how to organize work around them, it is hard to imagine a firm-wide sudden 50%+ efficiency gain that justifies massive organizational cuts."
The broader context reinforces the caution. An Oxford Economics report from January 2026 found that many layoffs CEOs were attributing to AI were corrections for pandemic over-hiring. Sam Altman, CEO of OpenAI, called the pattern AI washing directly: "I don't know what the exact percentage is, but there's some AI washing where people are blaming AI for layoffs that they would otherwise do." Block quietly began rehiring some employees in the weeks after the cuts, according to The Street, though the scale was not disclosed.
Wrap up
The Block layoffs matter because Dorsey was unusually explicit. He did not quietly attribute the reductions to restructuring or performance. He named AI tools as the mechanism, set a specific productivity target, cited an internal platform as evidence, and told his peers publicly that they were behind.
That explicitness is what makes this a real test rather than a narrative. If Block's gross profit per employee target holds over the next two to four quarters, Dorsey's thesis gets genuine evidence. If it doesn't, the AI-native restructuring playbook will look considerably less credible than it did the morning after the announcement.
A healthy, growing company cut 40% of its workforce, framed it as forward-looking strategy, and saw its stock jump 22%. Other CEOs noticed. Whether they follow depends on what Block's numbers actually show.
Frequently Asked Questions
Why did Jack Dorsey lay off 40% of Block's workforce?
Dorsey attributed the cuts to AI tools, specifically Block's internal platform Goose, which he said enabled significantly higher productivity per employee. Block's gross profit had grown 17% year-over-year in 2025, and Dorsey was explicit that the decision was not driven by financial difficulty. His stated target was to reach more than $2 million in gross profit per employee, compared to roughly $500,000 in the pre-pandemic period.
How did Block's stock react to the layoffs?
Block's shares jumped roughly 22% in after-hours trading, reversing a long slide that had left the stock down about 40% since January 2025. The market responded positively to the combination of strong earnings and a productivity-driven rationale for the cuts.
What is Goose, the AI tool Dorsey cited?
Goose is Block's internal AI platform that started as an engineering experiment and had by February 2026 expanded across most of the company's departments. Dorsey cited data showing engineers using Goose were shipping approximately 40% more code per person than six months earlier, and pointed to a December 2025 improvement in AI model capabilities as the specific turning point that made the restructuring viable.
What is AI washing and does it apply to Block?
AI washing refers to attributing layoffs to AI productivity gains when the actual causes are more traditional, such as pandemic over-hiring corrections or cost-cutting. Oxford Economics found in January 2026 that many CEOs were doing exactly that. Block's history, including tripling its headcount between 2019 and 2023 and running duplicate corporate structures for years, gives critics credible ground. OpenAI CEO Sam Altman publicly called the broader pattern AI washing in February 2026.
What did Dorsey say about other CEOs being "late"?
In his shareholder letter, Dorsey wrote: "I think most companies are late. 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."
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