Jason Calacanis used Block (NYSE:XYZ | XYZ Price Prediction) as a case study on a recent This Week in Startups episode to argue that AI-driven productivity gains have become a prisoner’s dilemma for every public company CEO. Block cut over 4,000 people in February 2026, taking headcount from over 10,000 to under 6,000. Three months later, the company posted Q1 2026 adjusted diluted EPS growth of 51.8% ($0.85 against $0.56 in the prior-year quarter), and raised full-year 2026 adjusted EPS guidance from $3.66 to $3.85, a 62% year-over-year growth target. The stock closed at $74.85 on May 8, up 6.72% on the day and up 19.13% over the prior month.
The point is, companies are increasingly seeing that reducing headcount increases profits. Even if they don’t want to slash jobs, their hand can eventually be forced because they’ll otherwise lose to a competitor with a better cost structure.
Calacanis: “If You Don’t Take It, Your Competitor Takes It”
Calacanis framed the structural argument bluntly: “If there is a gain to be had, you have no choice but to take it. That’s capitalism. Because if you don’t take it, your competitor takes it. Their earnings go up. They can attract the best talent. You can’t.” As of early April, 100% of Block employees are using AI tools to do their work, and production code changes per engineer are up more than 2.5x since the start of the year. Builderbot, Block’s internal AI agent, is reviewing more than 90% of production code change requests. CEO Jack Dorsey told analysts, “a significantly smaller team, using the tools we are building, can do more and do it better.”
Industry-Wide Layoffs
The same week brought parallel moves across the sector. Cloudflare (NYSE:NET) announced a 20% workforce cut, with CEO Matthew Prince citing an “agentic AI-first operating model.” Shares fell to $196.13, down over 20% from highs. Coinbase (NASDAQ:COIN) announced a 14% cut, equating to 700 people, alongside a GAAP loss of $1.49 per share against a $0.04 estimate.
What To Watch
Recent numbers already suggest Block’s layoffs are working. Now, the real question is: what happens when every large tech company realizes that AI can permanently change its labor model?
Block just showed that a much smaller workforce can still accelerate product output, expand margins, and grow earnings at scale. That creates a dangerous dynamic for competitors because investors will eventually expect similar efficiency gains elsewhere. Companies that hesitate may end up looking bloated next to peers posting stronger margins with leaner teams.
The next phase to watch is whether these AI productivity gains actually prove durable. If Block can sustain faster development cycles, stronger profitability, and double-digit earnings growth into 2027 with a much smaller headcount, the rest of tech may have little choice but to follow the same playbook.
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