Another Company Trades AI Layoffs For Stock Price

By Douglas A. McIntyre Published May 27, 12:15PM EDT

Another Company Trades AI Layoffs For Stock Price — © seewhatmitchsee / iStock Editorial via Getty Images

It has become a pattern. A public company lays off employees and says it has found new efficiencies due to AI. Its stock trades higher immediately. This happened yesterday. The job loss count was modest. Groupon (NASDAQ: GRPN) cut 400 people, but the cut was high relative to its overall employee count. It employs a total of 1,700 people. Groupon also raised its earnings outlook for the year. The stock moved up 10%.

A cynic might say Groupon made the move because its stock had performed so poorly this year until a few days ago. (These pre-announcement stock moves are old at stock market time.)

The stock run-up happened just in time. First-quarter earnings were mediocre. Revenue was flat at $117 million. The company had a net loss of $13 million compared with a profit of $7 million in the year-ago period.

The “layoff helps stock” narrative got its big start when Block (NYSE: XYZ | XYZ Price Prediction) cut 40% of its workers. That took its total from just over 10,000 to 6,000. Speaking of AI tools, Chief Operating Officer Amrita Ahuja said, “It feels like the acceleration is actually only quickening and we are seeing, really, an inevitability at this point around productivity gains and what that means for us as a business.” If this continues to work so well, Block’s employee count might eventually come close to zero.

One of two things happened. Both have gotten a good deal of press and analysis. Either companies are using AI as an excuse to lay people off to improve margins, or AI is as powerful as Groupon, Block, and dozens of other companies say. Either way, hundreds of thousands of people have their jobs on the line. The Wall Street Journal recently did a long analysis titled, “Phoenix Built an Empire of Cubicle Jobs. AI Is Coming to Tear It Down.” It implied that the economy of America’s fifth-largest city could be partially dismantled.

Groupon is another company that begs the question of whether it, and a few other companies, are the tip of the AI iceberg. That is written about every day in 247WallSt pages. And, the opinions on bath sides are well-reasoned. So well reasoned that AI may soon be the primary debater.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.