Those were the two questions whipping around the business world following Block’s shocking announcement that it was slashing 4,000 jobs, or nearly half its workforce. The parent company of Square and Cash App reported Q4 gross profits of $2.9 billion, up 24% year over year. Its shares jumped almost 20% in the trading sessions on Feb. 26 following the earnings release and the announcement of a major workforce reduction.

But if the company is profitable and growing, why cut jobs now? “We believe that it is actually from a position of strength that we have the ability to take an action like this with confidence and execute on it in a way that continues to deliver for our customers and stakeholders,” Amrita Ahuja, CFO and COO at Block, told Fortune.

The decision to cut almost half of the workforce was part of a longer transformation rather than a sudden reaction to market pressure, Ahuja said. “This is a two-year journey for us,” she said. “This was not an overnight decision.”

Ahuja describes the move as the culmination of a push to embed AI deeply across the company. Block’s internal use of AI has already made its workforce more productive and helped support the company’s decision to raise its 2026 guidance even as it reduces headcount, she said.

Central to that strategy is codename goose, Block’s internally built AI agent that sits on top of large language models to execute actions, draft emails, and automate workflows. Goose has been in production internally for about 18 months and has been open-sourced, allowing other companies to experiment with it as well, Ahuja said. Since September, she added, developer productivity at Block has improved with a 40% increase per engineer use of AI tools to push code and features to production faster.

One risk underwriting model that previously took a full quarter to build was completed in a fraction of the time with these tools, giving leaders confidence that smaller teams can now handle “really meaningful bodies of work,” Ahuja said.

In major strategic discussions, Ahuja said her role as CFO and COO is to rigorously debate ideas and then focus on executing them well for employees, customers, and investors.

There was no top-down percentage target for reductions, Ahuja said. Instead, leaders across the company built plans from the ground up around three principles: protecting the resilience and trustworthiness of Block’s platforms; maintaining compliance and risk capabilities across money movement, savings, and commerce; and preserving the ability to execute on a growth-oriented product roadmap.

The company simultaneously raised its 2026 outlook, now expecting gross profit to grow 18% year over year and profits to climb 54%, reflecting expectations that AI-driven efficiency will translate into margin expansion, she said.

‘Look at the data’

Block’s layoffs come amid a broader wave of tech-sector layoffs that have eliminated tens of thousands of jobs in recent months. Some companies have downplayed linking cuts directly to AI. Dorsey, however, explicitly tied Block’s layoffs to productivity gains from the technology.

In a post on X, formerly Twitter, which he co-founded, CEO Jack Dorsey addressed pushback that layoffs at Block, Inc. were mainly due to over-hiring. Dorsey said the company “over-hired during COVID,” which he attributed in part to building separate organizational structures for Square and Cash App — a setup he said was corrected in 2024. But he said, attributing layoffs solely to over-hiring, “misses all the complexity,” pointing to the company’s expansion into lending, banking and buy now, pay later, as well as its goal of boosting efficiency.

To those who view Block’s position on AI as a convenient label for classic over-hiring, then cutting cycles, Ahuja says: “Look at the data.” In 2019, she noted, Block generated about $500,000 in gross profit per employee, a figure that remained roughly unchanged even as the company expanded from a few thousand workers to around 13,000 during the hyper-growth years. Over the last few years, however, that metric has climbed to roughly $750,000 in 2024 and $1 million in 2025, and if Block meets the targets it laid out last week, gross profit per employee in 2026 would reach about $2 million—double last year’s level. 

“I don’t think this is about bloat,” Ahuja said. “This is about empowering our teams with the most world-class and powerful tools that we have to help them do their work more efficiently.”

Impact on employees

For companies, there’s a strategy behind making large-scale layoffs, but it certainly affects the employees who remain. And U.S. employee engagement has already fallen to a 10-year low, according to Gallup. 

Inside Block, leaders weighed two paths: one “bold, decisive” restructuring that aligns Block with where Ahuja and Dorsey believe the world is heading, or a series of smaller, reactive cuts that would require constant rewiring of how the company operates, Ahuja said. They chose the former, in part because of its impact on morale.

“It is big news for anyone to get over,” Ahuja said. ”We are saddened to see colleagues go. We’re incredibly grateful to those folks who have helped us build Block.”

Ahuja acknowledged the emotional toll of losing colleagues and the reality that remaining employees will shoulder more work in the near term. But equipping those employees with “the most powerful tools in the world,” investing in reskilling, and backing that with rewards and recognition positions them better for the future—whether at Block or elsewhere, she said.

Block’s laid-off employees received a severance package that included 20 weeks of base salary, with an extra week for each year of tenure. They also continued to vest equity through May and received six months of healthcare coverage. Additionally, employees were given a $5,000 transition stipend and could keep their work devices.

Looking ahead, Ahuja said that Block is not imposing a hard cap on headcount. She expects the company to continue hiring in targeted areas, particularly in sales and AI-focused engineering roles that are directly tied to revenue growth and product innovation.

Dorsey has predicted that many other companies will come to similar conclusions and rewire their organizations around AI. 

“It’s hard to tell the future,” Ahuja said. “But based on the pace of advancement that I have seen in the technology and how powerful it is, the wow moments that get unlocked as people actually start using it, I think this is absolutely where the world is headed.” It may happen at a different pace for each company, depending on how facile and experimental they’ve been with the technology, she said.