Block Inc (NYSE:XYZ) shares jumped more than 22% in U.S. premarket trading on Friday after the payments company revealed plans to cut nearly 40% of its workforce as part of a broader push to integrate artificial intelligence more deeply across its operations.
The layoffs — expected to eliminate more than 4,000 positions — come as companies increasingly adjust staffing levels in response to the rapid adoption of AI technologies. The trend has fueled concerns among employees and economists that the productivity gains driven by AI could also lead to higher unemployment.
“Block may serve as a case study for how AI investments may adversely impact employment rates. That said, Block is a tech-forward company that has invested meaningfully in internal AI tools which is allowing them to take such a drastic action,” analysts at Truist Securities led by Matthew Coad said in a note.
Chief Executive Officer Jack Dorsey said in a statement that “[i]ntelligence tools have changed what it means to build and run a company,” adding “[w]e’re already seeing it internally” and “[a] significantly smaller team using the tools can do more and do it better[.]”
While Block expects restructuring costs of up to $500 million, Truist analysts suggested the strong share price reaction likely reflects investor expectations that slimmer staffing levels will improve profitability over time.
The company raised its full-year 2026 guidance, now projecting gross profit of $12.20 billion and adjusted operating income of $3.20 billion. Management believes the organizational changes will materially expand margins and lift adjusted diluted earnings to $3.66 per share.
Evercore analyst Adam Frisch described the scale of the layoffs as a “shocking headline” and said the move could represent a defining moment for the technology industry. He added that it marks the “seminal moment to date in the AI narrative and how it could transform companies as we know it going forward.”
Frisch also highlighted Block’s quarterly performance as encouraging, calling the development “fascinating” even though such a scenario had not previously been considered in forecasts for 2026.
Block reported fourth-quarter adjusted earnings of $0.65 per share, slightly ahead of the $0.64 analyst consensus estimate. Revenue for the quarter totaled $6.25 billion, narrowly missing Wall Street expectations of $6.29 billion.
Gross profit rose 24% year over year to $2.87 billion, supported by a 33% increase in Cash App performance. The Square ecosystem also remained resilient, with gross payment volume growth accelerating to 12% through late February.
Cash App engagement strengthened, with “Primary Banking Actives” increasing 22% to 9.3 million users — a segment that generates roughly ten times the profit of peer-to-peer users. Meanwhile, Square saw particular momentum in the Food and Beverage segment, where gross profit grew 16% following significant investment in specialized seller software.
The company also exceeded the “Rule of 40” benchmark during the quarter, an industry metric combining gross profit growth and operating margin. Management expects this momentum to continue into 2026 and is targeting a “Rule of X” score of 44% as it focuses on disciplined cost control.