Written by: Cathy
On February 26, 2026, Block released its Q4 earnings report, and its stock price surged over 23% in after-hours trading. The market value increased by approximately $2.4 billion overnight.
On the same day, 4,000 employees received termination notices.
This contrast is the most brutal footnote of our current era.
01 A Letter That Ignited Silicon Valley
What sparked all of this was a letter.
That day, Block co-founder Jack Dorsey sent an open letter to all employees. He wrote, "Smart tools have changed the meaning of building and operating a company. A significantly reduced team, using the tools we are building, can accomplish more work and do it better." The implication was clear: the company decided to achieve higher output with fewer, more streamlined talents.
This is not a struggling company cutting back on spending. In Q4 2025, Block's total gross profit was $2.87 billion, a 24% year-over-year increase; the annual gross profit surpassed $10.36 billion. Cash App's gross profit increased by 33% year-over-year, with adjusted earnings per share of $0.65, exceeding analyst expectations.
The financial report looked great, the stock price soared, and then the company laid off 40% of its staff.
No one had ever done this before.
Block's workforce expanded from 3,835 employees at the end of 2019 to over 10,000 during the pandemic's expansion phase. Dorsey admitted in the letter that this was a misjudgment of growth. The emergence of AI gave him the opportunity to correct the mistake. It's not that the company has weakened; rather, AI has allowed the company to become stronger. Dorsey refers to this as "intelligent native"—a way to redesign the company with AI as the core productivity unit.
02 AI Has Already Started Working for You
The "smart tools" Dorsey mentioned do not refer to general interfaces like ChatGPT.
Over the past two years, Block has quietly built an internal AI ecosystem called "Goose." It is deeply integrated with more than 150 software and data services within the company through a Model Context Protocol (MCP), capable of reading real-time financial data and performing operations directly within the codebase, billing systems, and data dashboards, rather than merely generating text suggestions.
The numbers speak for themselves: in customer service, AI currently handles about 60% of Cash App's cases, and in engineering, since the introduction of AI-assisted programming tools in September 2025, the amount of production code delivered by each engineer has significantly increased.
In Q3 2025, Block launched the G2 agent-based interface built on Goose. It completely changed the way employees work—of the 6,000 employees who remained, they no longer perform data entry or initial coding but instead command AI clusters to complete complex tasks through the G2 interface. Legal document reviews, initial HR screenings, and video asset rough cuts are now completed by G2.
Humans have shifted from "operators" to "curators."
The newly launched "Neighborhoods" feature also corroborates the efficiency of this model—concept to launch took less than six months. In Dorsey's vision, the 6,000 people, combined with Goose, can achieve what previously 10,000 people could not. This logic is the true underpinning of this round of layoffs.
03 "Gentle Knife"
Compared to Elon Musk's layoffs after acquiring Twitter in 2022, Dorsey's approach is entirely different.
Musk's method involves suddenly locking down systems, issuing "hardcore" ultimatums, and only providing the legal minimum compensation, which spurred numerous lawsuits.
Dorsey's approach offers a minimum severance package starting at 20 weeks of base salary (one additional week for each year of service, whereas the industry standard is reportedly only 12 to 14 weeks), 6 months of full medical insurance, a $5,000 cash transition allowance, an extension of stock option vesting until the end of May 2026, and employees can keep company-issued computers and mobile devices.
This plan is nearly a ceiling-level achievement in tech industry layoff history. But that knife remains sharp for all that.
According to feedback from Wired magazine and the internal anonymous platform Blind, Block's internal culture is on the "verge of collapse." Dorsey has accused some employees of "going through the motions," attributing structural optimization to individual performance, which has caused widespread anxiety among remaining employees. Those who remain, on one hand, bear double the workload, and on the other hand, constantly worry if the next "AI efficiency assessment" will point to them.
The generous severance pay eliminates the risk of collective lawsuits; on the other hand, it also helps Dorsey maintain a "decent employer" image in public, shifting the external focus more towards the narrative of AI efficiency rather than the reality of 4,000 families losing their livelihoods. This "cold business decision" wrapped in an "emotional all-staff letter" constitutes a complex management case study.
04 Why Wall Street Cheers for Layoffs
The logic of the capital market is quicker than anyone else.
The stock price soared 23% in after-hours trading, and market value increased by approximately $2.4 billion. Roughly estimated, every employee eliminated generates about $600,000 in book value for the company.
Long-term estimates are even more astonishing. In 2026, Block expects to generate about $12.2 billion in gross profit; calculated with fewer than 6,000 employees, the gross profit per person will approach $2 million, far exceeding top tech companies like Google and Meta.
In 2026, with the Federal Reserve maintaining high interest rates and technology companies tightening financing, the capital market's aesthetic has shifted from "growth premium" to "profit premium" and "unit productivity premium." Block successfully surpassed the "40 rule" (the sum of revenue growth rate and profit margin not lower than 40%) and completed a $790 million stock repurchase in Q4, with a total buyback of $2.3 billion for the year.
Boards of directors understand this script.
The Block case may force the entire fintech industry to reassess its labor cost structure. Layoffs conducted "in the name of AI" are becoming an attractive strategic script. If CEOs find that announcing "AI replacement layoffs" can yield over a 20% stock price increase, large-scale white-collar layoffs will no longer need a recession as a justification.
05 Conclusion
The shift from "layoffs due to weakness" to "layoffs due to strength" poses an unprecedented challenge to job security for white-collar workers. Block is just the first to say it publicly.
When a company cuts its workforce by 40% while its stock price soars in the opposite direction, it sends a clear signal to the market: in future company valuations, the number of people is no longer an asset but may be seen as a form of "operational friction" that needs to be optimized through technology.
Whether Dorsey's gamble will succeed depends on whether those 6,000 remaining employees can truly harness Goose, whether AI-assisted code can withstand the test of time within complex systems, and whether an extremely streamlined company can continue to maintain its pace of innovation.
The answer may take years to emerge.
But this experiment has already begun, and no one knows where the finish line is.
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