Jack Dorsey was the most vocal, but AI is already replacing jobs.

The tech industry has been debating for years whether artificial intelligence will actually eliminate large-scale jobs or simply be used as an excuse for companies to make mass layoffs.

block I just planted that flag firmly.

Jack Dorsey, co-founder and CEO of Square’s parent company, announced Thursday that the company will cut about 40% of its workforce, reducing its headcount from more than 10,000 to just under 6,000. And he made his reasons clear, telling investors on Block’s earnings call that “intelligence tools” have fundamentally changed what it means to start and run a company.

Dorsey suggested that other American companies are looking to follow suit, predicting that the majority will reach the same conclusion within a year.

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

Investors quickly picked up on the message, sending the stock up about 25% in after-hours trading on Thursday, but the gains slowed somewhat on Friday, with the stock closing up 17%.

Mr. Block also provided a revenue forecast for the current fiscal year that was well above expectations, even though the past quarter’s results were generally in line with expectations.

Morgan Stanley analysts upgraded Block to overweight, writing that AI-driven efficiencies should improve profitability. Analysts at Goldman Sachs raised their price target, saying the cut would move Mr. Block from a middle-ranking company to near the top in terms of fintech worker productivity. Wells Fargo maintained its Buy rating on the stock, calling it a “quarter full of positive surprises.”

Block expects the company to take a hit of $450 million to $500 million in restructuring costs, with most of it brought forward to the first quarter and most of the cuts completed by mid-year. Dorsey said he chose to act all at once rather than make the cuts in stages.

“Repeated cuts are destroying morale, focus and the confidence our customers and shareholders have in our leadership capabilities,” he said.

This move dwarfs recent AI-related cuts. pinterest, cloud strike and CheggThe move comes as the debate over AI and jobs engulfs Wall Street.

Earlier this week, Citrini Research published a thought experiment titled “The 2028 Global Intelligence Crisis” that went viral online. The hypothetical memo, set two years into the future, warns that AI-driven job cuts could trigger a negative feedback loop of white-collar job departures, a collapse in consumer spending, and overall financial damage.

The report also includes critics, particularly from Citadel Securities, but there is real-world case study in the argument that AI-powered job cuts will appear first at profitable software companies.

Block said the current goal is to have gross profit per person of more than $2 million. This is about four times the pre-COVID-19 figure. Goldman noted that job cuts appear to be concentrated in engineering roles rather than revenue-generating or regulatory positions. This is consistent with Block relying on its in-house AI platform, Goose, to replace that job.

autodesk CEO Andrew Anagnost said Friday that revenue per employee is a metric that defines management efficiency.

“We’re taking a hard look at efficiencies going forward,” Anagnost told CNBC’s “Squawk on the Street.” “For efficiency reasons, we’re hiring fewer people at Autodesk. AI is definitely making engineering more efficient.”

Still, not everyone buys Dorsey’s explanation.

Block’s workforce has ballooned from about 4,000 in 2019 to nearly 13,000 during the pandemic, a fact cited by skeptics across social media after the layoffs were announced. Mr. Dorsey acknowledged Company X’s overhiring and argued that this was a mistake that was corrected in mid-2024. Goldman noted that the cuts will essentially return the block’s workforce to 2020 levels.

Mr. Dorsey previously made other recruiting efforts while running Twitter. After Elon Musk acquired Twitter (later renamed Company X) in 2022, he cut the company’s labor costs by about 80% within six months.

Piper Sandler analysts reiterated their underweight rating on Block following Thursday’s report, highlighting the company’s trading losses to 18% of gross profit in the period, up from 14% in the previous quarter and 11% a year earlier.

“Ultimately, XYZ’s right-sizing should be well-received by investors and boost ST’s profitability, but this seems an extreme measure and we remain skeptical of XYZ’s long-term growth profile,” the analysts wrote.

WATCH: Block stock soars more than 20%, announces plan to cut workforce by nearly half