Twitter co-founder Jack Dorsey has blamed artificial intelligence (AI) for mass layoffs at his fintech company Block, but admitted he overhired during the pandemic when challenged.

Block announced it is laying off 40% of its workforce, joining an increasing number of companies cutting roles in their thousands as a result of what they say are AI-driven decisions.

“[T]oday we're making one of the hardest decisions in the history of our company: we're reducing our organization by nearly half, from over 10,000 people to just under 6,000,” Block CEO Jack Dorsey said in a post on X, formerly known as Twitter.

Dorsey said Block is not making this decision “because we’re in trouble” but rather because AI tools “are enabling a new way of working which fundamentally changes what it means to build and run a company.”

In a letter to shareholders, he elaborated further, suggesting job cuts at Block reflect a broader shift in the labor market.

“I don't think we're early to this realization. I think most companies are late. Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes,” Dorsey said.

Block was founded in 2009 and its portfolio includes products such as Square, Cash App, and Afterpay.

Some observers are challenging Block’s narrative that it is laying people off because of AI, pointing at an industry-wide “overhiring binge” during the Covid pandemic. Block’s workforce almost tripled from 3,900 in December 2019 to 12,500 three years later.

Responding to criticism, Dorsey acknowledged overhiring “because [I] incorrectly built [two] separate company structures,” referring to Square and Cash App, which he said was corrected in 2024.

According to Dorsey, Block was now targeting four times pre-Covid efficiency and that “we have and do run an efficient company... better than most.”

Block shares soared 24% after it announced layoffs, which caused dismay on social media, where users said markets were now rewarding AI-driven job cuts, and fueled further speculation about Dorsey’s true intentions.

Some users argued that the stock market might have reacted differently if Block had framed the layoffs as a result of overhiring, which could signal a bloated company structure, a charge Dorsey also faced during his time leading Twitter.

“Maybe Block laying off a ton of employees is a sign that AI is gonna destroy everything. Or maybe the stock is down 80% from the highs and they overhired and AI is a convenient excuse,” finance writer Ben Carlson said on X.

In its most recent quarterly results, Block reported $6.25 billion in revenue and a 24% rise in gross profit from a year earlier to about $2.87 billion. The firm is not alone in blaming layoffs on AI.

Pinterest said it was laying off 15% of staff because of AI last month, with Australian software company WiseTech announcing this week it was letting go of a third of its workforce for the same reason.

Amazon announced 16,000 additional job cuts, on top of 14,000 white-collar roles eliminated in the previous round of layoffs announced in October last year, while eBay said this week it is laying off 6% of its workforce, or about 800 people.

While there is little doubt that AI will shake up the labor market, OpenAI CEO Sam Altman said last week that some companies appear to be engaging in “AI-washing,” falsely attributing AI as the reason for layoffs.

According to Altman, the real impact of AI on the jobs market will become palpable in the next few years, with new roles emerging to replace those that were made obsolete.

US companies announced 108,435 job cuts in January, an increase of 118% in the same month last year, and up 205% in December, according to outplacement firm Challenger, Gray & Christmas. It is the highest number for the month of January since 2009.

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