Jack Dorsey Just Cut 40% of Block’s Workforce. The Stock Soared.

Block, the company behind Cash App and Square, reported strong Q4 results Thursday after the close and simultaneously announced it would cut more than 40% of its workforce. Shares surged as much as 23% in after-hours trading. It’s one of the most aggressive corporate restructurings in recent tech history, and the market loved it.

Restructuring is hard

CEO Jack Dorsey framed the layoffs as a fundamental rebuild of the company around smaller, faster, AI-native teams. In his shareholder letter, Dorsey said Block is “reshaping itself” to execute more efficiently as AI becomes embedded in its product development. The company expects $450 million to $500 million in restructuring charges, mostly in Q1 2026, with execution substantially complete by mid-year.

Excellent earnings

Underneath the layoff headline, the actual business results were strong. Q4 gross profit rose 24% to $2.87 billion. Cash App gross profit jumped 33%, driven by a 69% increase in consumer lending and 22% growth in primary banking users. Block raised its 2026 outlook: $12.2 billion in gross profit (+18% YoY), $3.20 billion in adjusted operating income (26% margin).

Why the stock soared

Wall Street rewarded Block for doing what investors have been demanding across tech: cutting headcount aggressively to improve profitability, while using AI to do more with fewer people. The combination of a strong earnings beat, raised guidance, and a clear path to higher margins through restructuring is exactly the formula the market is paying up for right now. Whether the cuts are too deep, and whether “AI-native teams” can actually deliver on that promise, will play out over the next several quarters.

Sources: CNBC, Bloomberg, Yahoo Finance, Block Shareholder Letter