A U.S. IT company announced plans for massive layoffs citing artificial intelligence tools. The market interpreted the announcement as a signal of cost efficiency, sending shares up more than 25%.
According to the Wall Street Journal and other outlets on May 26 (local time), Block, the payments company founded by Twitter co-founder Jack Dorsey, announced it would cut more than 4,000 employees—approximately 40% of its workforce—due to the adoption of AI tools.
In a letter to shareholders, Block CEO Dorsey said AI tools have transformed how the company operates. "We can accomplish more work, more efficiently, with much smaller teams," he wrote.
"I think that within a year, most companies will reach the same conclusion and implement similar structural changes," Dorsey said. "It's not that we realized this early—rather, most companies are behind."
In a memo to employees posted on X (formerly Twitter), Dorsey emphasized that the layoffs were not due to financial difficulties. He explained that Block's financial condition remains sound.
Dorsey acknowledged that the massive workforce reduction could pose short-term risks to customer service capabilities but stood firm on the decision. "There is risk in making a decision this significant. But there is also risk in standing still," he said. "I made this decision, and I take responsibility for it."
Block shares surged more than 25% in after-hours trading following the announcement.
A wave of AI-driven layoffs has recently swept technology companies worldwide. Bloomberg noted that "many companies are reducing headcount citing AI adoption," adding that "some experts are questioning whether companies are genuinely transforming through AI or simply using it as justification for cost cuts."