Block, the parent company of Afterpay, recently announced plans to cut 40 per cent of its workforce, impacting approximately 4,000 employees. This decision, revealed by founder Jack Dorsey, aims to streamline the payments giant, improve efficiency and boost profitability. Block provides financial services with a focus on mobile payments; Afterpay, a subsidiary, specialises in buy now, pay later services.
The announcement follows a week of intense debate among analysts and hedge funds regarding a potential ‘white-collar apocalypse’ driven by artificial intelligence. Block’s share price surged 25 per cent following the announcement, adding $US8 billion to the company’s market capitalisation. However, the move also raises questions about the broader implications of AI-driven job cuts across the industry.
Dorsey acknowledged that Block had over-hired, particularly after acquiring Afterpay in 2022. The company is now targeting revenue per employee of $2 million, a fourfold increase from pre-pandemic levels. Similar moves are occurring elsewhere in the tech sector, with Atlassian initiating a hiring freeze and WiseTech Global planning to reduce its workforce by 2,000, all citing AI-driven efficiency as a primary driver.
The market appears to favour companies willing to undertake significant layoffs, assuming they can maintain or even accelerate sales growth. As companies demonstrate their ability to achieve more with fewer employees, the focus shifts to the potential for margin expansion and the long-term impact of AI on the workforce.
