On February 26, 2026, Twitter co-founder and Block (formerly Square) CEO Jack Dorsey published an open letter on X announcing one of the boldest AI-driven layoffs in tech history: Block would cut nearly half its workforce, from 10,000 down to under 6,000, with over 4,000 people let go.
Wall Street loved it β Block's stock surged over 24% in after-hours trading.
But was this truly a forward-looking decision, or a carefully repackaged correction?
"Not Because We're in Trouble"
Dorsey's letter, written entirely in lowercase, opened with a clear stance:
"we're not making this decision because we're in trouble. our business is strong. gross profit continues to grow, we continue to serve more and more customers, and profitability is improving."
He attributed the cuts to advances in AI tools β "smaller, flatter teams paired with intelligent tools are fundamentally changing what it means to run a company." Rather than dragging out layoffs over months, he chose to cut deep and fast.
Block's Q4 2025 earnings, released the same day, backed the "strong business" claim: gross profit up 24% YoY to $2.87 billion, adjusted EPS of $0.65 (vs. $0.47 a year ago), and full-year 2026 gross profit guidance of $12.2 billion (+18% YoY).
The numbers check out. But the story behind them is far more complicated.
The Severance Package
Laid-off U.S. employees will receive:
- 20 weeks' pay plus 1 week per year of tenure
- Equity vesting extended through end of May
- 6 months of healthcare
- Keep company equipment
- $5,000 transition stipend
Dorsey also kept Slack and email channels open until Thursday night so people could say proper goodbyes, and hosted a live video appreciation session. According to The New York Times, the all-hands video call was flooded with π emoji reactions.
The COVID Hiring Reckoning
Zoom out, and an uncomfortable pattern emerges:
| Year | Block Headcount |
|---|---|
| End of 2019 | ~3,900 |
| End of 2020 | ~5,477 |
| End of 2022 | ~12,428 |
| End of 2025 | ~10,205 |
| Post-layoff target | <6,000 |
In three years (2019β2022), Block more than tripled its headcount. Like every tech company that binged on cheap-money-era hiring, Block loaded up on people during COVID and found itself overstaffed when the tide went out.
As one X user (Will Slaughter) put it bluntly:
"In 3 years from December 2019 to December 2022, Block more than tripled its headcount from 3,900 to 12,500. Unwinding less than half an insane COVID overhiring binge has much more to do with Jack Dorsey's decisions than AI."
This isn't even Block's first round β they cut 8% in 2023, ~1,000 in early 2024, and 931 in March 2025. It took four rounds before the AI narrative was deployed.
The Stock: Down 80% from Highs, 24% Bounce Is Just a Blip
The chart tells the real story:
- All-time high: $281.81 (August 2021)
- Pre-layoff close: $54.53
- Decline: -80.6%
A 24% after-hours pop to ~$67 sounds exciting, but that's still 76% below the peak. As financial analyst Ben Carlson wrote on X:
"Maybe Block laying off a ton of employees is a sign that AI is gonna destroy everything. Or maybe the stock is down 80% from the highs and they overhired and AI is a convenient excuse."
The Shopify Parallel
Block's story isn't unique. Shopify walked an almost identical path:
Massive COVID hiring β stock peaks then crashes β CEO admits "we hired too many" β mass layoffs.
In 2023, Shopify CEO Tobi LΓΌtke laid off 20% of staff, using a gaming metaphor: the company had been chasing "side quests" and needed to return to the "main quest." Dorsey's framing is different words, same logic β hired too many people doing too many things, time to "focus."
The irony: Dorsey himself publicly apologized in 2022 when Musk acquired Twitter and laid off 80% of staff: "I grew the company size too quickly. I apologize for that." He then returned to Block and grew headcount from 5,477 to 12,985 over three years. As Forbes noted: inflate then slash β Musk's Twitter reset was forced, Dorsey's Block reset was voluntary, and AI is simply the excuse Musk never needed.
Competitors Pounce
Hours after the announcement, an xAI recruiter named Benedict (@xbxnxdxcxtx, X bio: "Talent @xai") posted directly under Jack's tweet:
"To all 4000 people that got let go from @blocks: X Money is hiring! DM me your best work and your resume/linkedin"
X Money is Musk's payments initiative for the X platform (digital wallet, P2P transfers) β directly competing with Block's Cash App and Square. The thousands of payments and fintech talent Block just shed are exactly what X Money needs.
One company fires, another poaches β perhaps the most telling scene of 2026 tech.
Silicon Valley's Chain Reaction
Block's layoffs sent shockwaves not just because of scale, but because Dorsey said the quiet part out loud: AI replaces headcount.
Prominent investor Balaji Srinivasan posted on X: "This is the first AI cut. And it will send shockwaves."
Clara Shih (Meta senior advisor) drew a sharper parallel: "In 2000, jobs went to Shenzhen. In 2026, jobs go to AI."
Sequoia partner Shaun Maguire expressed respect for the move, while VC Jessica Verrilli raised a deeper question: "When headcount drops off a cliff, we need to find ways for everyone to share in the upside."
Others stayed skeptical β a Forrester Research report last month questioned the "AI-driven efficiency" narrative, arguing that most layoffs remain fundamentally financially driven.
The Three-Layer Truth
The real reason behind these layoffs is likely three layers deep:
Layer 1: COVID overhiring reckoning. Triple headcount in three years, now pay the bill. Every tech company is dealing with this.
Layer 2: Stock price pressure. From $282 to $55, Wall Street needed to see cost-cutting conviction. The 24% pop on layoff day proves the market prices headcount as liability.
Layer 3: AI provides the narrative. "Cutting half the company" sounds like "strategic transformation for the future" rather than "I hired too many people."
AI is genuinely changing how work gets done β that's real. But attributing a 40% workforce reduction entirely to AI whitewashes management mistakes.
As Forbes' headline put it: Jack Dorsey fired the first shot in AI layoffs. Regardless of how much of that bullet was AI and how much was financial correction, it's already in the air. Every CEO is doing the same math tonight.
Sources: Jack Dorsey's open letter on X, Forbes, TechCrunch, Business Insider, Reuters, BBC, The New York Times, VentureBeat, Block Q4 2025 Earnings Report