Block Layoffs Ignite Online Firestorm: AI Disruption Or Just Plain Bad Management?

While Jack Dorsey defends the move to lay off people as a necessity of the current times, users on Stocktwits and X are raising concerns about the job cuts.

• Block’s shares jumped nearly 24% during overnight trading on Thursday following the company’s decision to lay off more than 4,000 people of its 10,000 employees.
• Jack Dorsey, in a post on X, said that the decision was not made because the business was in trouble.
• Dorsey defended the need to lay off the employees and noted that intelligence tools have changed what it means to build and run a company.

The verdict is in for Jack Dorsey's Block, Inc. Investors are definitely on board with the fintech company's decision to slash almost half of its roughly 10,000-person workforce. But another debate is springing up online: do the layoffs actually reflect disruption from emerging AI tools or missteps from Dorsey's overhiring during the COVID-19 pandemic?

A closer look at Block’s hiring (and firing) since 2018 reveals not only that the company’s headcount nearly quadrupled over the five years to 2022, but also that it had already started contracting over the past two years, when the AI boom was still in a relatively nascent stage. Notably, the international workforce also expanded sharply (from 12% of the total to nearly 25% by 2022) and has stayed roughly stable over the past four years.

What Are X And Retail Users Thinking?

A user on X named Marcelo Lima said that Block has been massively bloated for years and noted that Dorsey was the head of Twitter, but when Elon Musk took over and fired 80% of staff within 5 months, the product got better.

A user on Stocktwits said that the employees who were laid off at Block work from home over hires during the pandemic, and added that this was a classic way to blame artificial intelligence.

Dorsey, in a post on X , said that the decision was not made because the business was in trouble. “Our business is strong. gross profit continues to grow, we continue to serve more and more customers, and profitability is improving. But something has changed,” he said.

“We're already seeing that the intelligence tools we’re creating and using, paired with smaller and flatter teams, are enabling a new way of working which fundamentally changes what it means to build and run a company, and that's accelerating rapidly,” the post by Dorsey read.

Another user on X said this should not be taken as a sign of AI-related layoffs in the business world, but rather as something to do with Block being “beyond bloated.”

Retail Traders Not Ruling Out AI Impact On Block

Dorsey, in his post, added that they were going to build this company with intelligence at the core of everything they do. “How we work, how we create, how we serve our customers. Our customers will feel this shift too, and we're going to help them navigate it: towards a future where they can build their own features directly, composed of our capabilities and served through our interfaces. That's what I'm focused on now,” he said.

A bearish user on Stocktwits noted that it was worrisome that a stock jumped after the company announced plans to fire 40% of employees as it looks to use AI.

Another user on the platform said that Block was laying off employees because demand for its products and services had plummeted. “Dorsey blames AI. Like what? Stock has been in the gutter for 3 years now, long before AI became a thing,” the user said.

Dorsey Defends His Strategy

In a post-earnings call on Thursday, Dorsey defended the need to lay off employees and noted that intelligence tools have changed what it means to build and run a company. “Intelligence tool capabilities are compounding faster every single week,” Dorsey said, adding that Block will be significantly more valuable as a “smaller, faster, intelligence-native company.”

He said that within the next year, most companies will reach the same conclusion and make similar structural changes. “I’d rather get there honestly and on our own terms than be forced into it reactively,” Dorsey said, addressing the layoffs.

Block operates a suite of payments and financial services platforms, including Square, Cash App, Afterpay, TIDAL, Bitkey, and Proto. The company has faced pressure from slowing profit growth as elevated interest rates weigh on consumer spending.

Retail Sentiment For XYZ ‘Extremely Bullish’

Retail sentiment on Block jumped to ‘extremely bullish’ from ‘neutral’ a day ago, with message volumes at ‘extremely high’ levels, according to data from Stocktwits.

In the last 24 hours, retail message volume on Stocktwits for the stock jumped 2,664%, and the ticker has over 180,000 followers on the platform.

Shares of Block have declined more than 16% in the last 12 months.

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