Block cuts nearly half its workforce as Dorsey credits AI, but the real reasons predate the hype

Jack Dorsey blames AI for cutting nearly half of Block's workforce. But a closer look at the company's history of overhiring and structural problems tells a different story.

Around 4,000 of the company's more than 10,000 employees are being let go. Dorsey says AI tools that enable smaller, flatter teams to work in fundamentally new ways are behind the decision.

The company isn't struggling financially, gross profit is growing and the business is healthy, according to Dorsey. He says he deliberately chose one big cut instead of dragging things out with repeated rounds of layoffs.

Affected employees will receive 20 weeks' salary plus one week per year of service, stock vesting through the end of May, six months of health insurance, their company equipment, and $5,000 in transition assistance. Following the announcement, Block's stock jumped roughly 25 percent.

The AI explanation doesn't tell the whole story

There's reason to believe Dorsey is at least partially "AI-washing" here, using AI as a justification for cuts that were already in the works. Back in November 2023, Block set a headcount cap of 12,000 employees and said it would hold that line until business growth significantly outpaced company growth.

Throughout 2024, Block stayed under that cap "through a combination of performance management, centralization of teams and functions to reduce duplication, and prioritization of our scope." The company said at the time it would remain below this limit and tighten cost discipline.

Dorsey admits on X that Block hired too many people during Covid. According to user Will Slaughter, the workforce more than tripled from 3,900 to 12,500 between December 2019 and December 2022. Dorsey says he mistakenly built two separate company structures for Square and Cash App instead of one - a problem that wasn't fixed until mid-2024.

On top of that, growing complexity from credit, banking, and buy-now-pay-later businesses added to the bloat, Dorsey says. Block is now targeting gross profit of over two million dollars per employee, four times the pre-Covid efficiency level, which had stagnated at around $500,000 from 2019 to 2024.

Between the Covid overhiring, years of duplicate structures, and a headcount cap that predates any AI push, these cuts clearly have roots that go well beyond new AI tools. Attributing a 4,000-person layoff mainly to AI doesn't quite add up, particularly when the announcement is framed as an effort to be open and transparent. At a time when deliberate AI hype fuels widespread uncertainty about job security, leading with "AI made us do it" instead of "we overhired" feels reckless. The media reaction would have looked very different if Dorsey had started with the latter.