Jack Dorsey made a very loud case that AI is already replacing jobs

The technology industry has spent the last two years debating whether artificial intelligence will eliminate jobs or just be used as an excuse for companies to go on strike.

Block it just planted its flag firmly.

Jack Dorsey, co-founder and CEO of Square’s parent, announced on Thursday that his company is cutting about 40% of its workforce, reducing the headcount from over 10 to less than 6,000. And he was clear about why, telling investors at Block’s earnings that “intelligent tools” have completely changed what it means to build and run a company.

Dorsey said that other American companies are about to follow suit, predicting that many of the businesses will reach the same result within a year.

“Our business is strong,” Dorsey wrote in a post on X. “Gross profits continue to grow, we continue to serve more customers, and profits are increasing. But something has changed.”

Investors immediately got the message, sending the stock up 25% in extended trading on Thursday, although gains were moderated on Friday, with the stock closing up 17%.

Block also provided a full-year earnings estimate that was in line with previous estimates, although the previous quarter’s results were in line with expectations.

Morgan Stanley analysts upgraded Block to an overweight rating, writing that AI-driven innovation should bring increased profits. Analysts at Goldman Sachs raised their price, noting that the cut would push Block from the middle of the pack to near the top in fintech operations. Wells Fargo maintained a buy rating, calling the quarter “chock full of positive surprises.”

Block expects to take $450 million to $500 million in cost recovery, mostly-loaded in the first quarter, with a number of cuts made in the middle of the year. Dorsey said he decided to do it all at once rather than making partial cuts.

“Repeated cuts destroy the morale, focus, and trust customers place in our ability to lead,” he wrote.

The movement increases in the recent AI-connected cutting on Pinterest, CrowdStrike and Cheggand the world as the debate over AI and jobs is consuming Wall Street.

Earlier this week, Citrini Research published an opinion poll that went viral titled, “The 2028 Global Intelligence Crisis” – a hypothetical memo set two years into the future warning that the AI-driven exodus could lead to white-collar unemployment, a drop in consumer spending and systemic financial damage.

While this proposal received its share of critics, especially from Citadel Securities, the argument that AI-based headcount reduction would first be shown to strong, profitable software companies with a real-world case study.

Block says it’s now heading north of $2 million in excess income per capita – about four times where the number was before Covid. Goldman noted that the cuts appear to be concentrated in engineering roles rather than finance or control positions – according to Block’s reliance on AI platform, Goose, to replace that role.

Autodesk CEO Andrew Anagnost said on Friday that employee turnover is what defines the performance of executive teams.

“We’re really looking at efficiency going forward,” Anagnost told CNBC’s “Squawk on the Street.” “We’re going to hire fewer people at Autodesk because of operations. We’re seeing more efficient engineering because of AI.”

However, not everyone is buying Dorsey’s explanation.

Block was cut from about 4,000 employees in 2019 to about 13,000 during the pandemic, a fact that skeptics reported on social media after the cuts were announced. Dorsey admitted to overstating X, calling it a mistake he fixed in mid-2024. Goldman noted that the downgrade would take Block’s head back to 2020 levels.

Dorsey went to a different hiring position when he ran Twitter. Elon Musk cut almost 80% of Twitter’s salary within six months to buy the company, later called X, in 2022.

Analysts at Piper Sandler reiterated their overweight rating on Block after Thursday’s report, noting that the company’s net loss widened to 18% of gross profit from 14% in the previous quarter and 11% a year ago.

“Bottom line, while the right size from XYZ is being well received by investors and should boost ST profits, it seems like an extreme move, and we remain skeptical about XYZ’s long-term growth profile,” the analysts wrote.

SEE: Block shares pop more than 20%, announces plans to cut staff by half