The Severance Package Is the Tell

Jack Dorsey just cut 4,000 people from Block. Nearly half the company. Gone in a day.

Not because the business is failing. Revenue: $6.25 billion last quarter. Cash App monthly active users: up. Gross profit outlook for 2026: raised. The company is growing.

A profitable, growing company just eliminated 40% of its workforce.

The stock went up 22%.

Three Signals

Most people will read this as a layoff story. I read it as three signals, and each one is worse than the last.

Signal One: The Severance

20 weeks of salary. Plus one week per year of tenure. Equity vesting through May. Six months of healthcare. Your corporate devices. And $5,000 cash.

Block is spending $450 to $500 million on severance. Half a billion dollars to make 4,000 people go away cleanly.

That number tells you everything.

When a company lays people off in a downturn, the severance is modest. Two weeks. Maybe four. Because the company is hurting too. The implicit message is: we'd keep you if we could.

When a company spends half a billion on severance while raising its profit outlook — the message is different.

They can afford to keep you. They're choosing not to. And they're paying for a clean, permanent break because those roles are never coming back.

You don't spend $500 million on a temporary restructuring. You spend that when the math is clear: these jobs are eliminated. Not deferred. Not outsourced. Gone.

The severance is the tell. It's Block saying: we've done the calculation, we know this is permanent, and we're paying enough to make it quiet.

Signal Two: The Market Reaction

The stock went up 22% after hours.

Read that again. A company announces it's firing nearly half its people. The market gives it a 22% premium.

This is the signal that should terrify you. Not because of what it says about Block. Because of what it says about incentives.

Every CEO in America saw that 22% pop. Every board saw it. Every CFO running headcount models saw it.

The message from Wall Street is explicit: cut your humans, and we will reward you.

That's not permission. That's a bounty.

When the market punishes layoffs, companies are cautious about them. When the market rewards layoffs — by 22%, in a single session — every company with margin pressure, every board with activist shareholders, every CEO who's been quietly wondering "what's our number?" just got their answer.

The answer is: cut now, get paid.

Block didn't just lay off 4,000 people. Block created an incentive structure for every other company to do the same thing. And unlike Block, most of them won't spend half a billion on severance. They'll do it cheap.

Signal Three: "We're Late, Not Early"

This is the one that keeps me up.

Dorsey said something during the earnings call that most coverage buried. He said "something happened in December" — last month — when he realized how capable AI models had become. And he framed the decision not as bold or aggressive, but as overdue.

We're late. Not early.

Let that land.

The CEO who just made the most dramatic AI-driven workforce cut in tech history is telling you he thinks he waited too long.

Which means every CEO who hasn't made the cut yet isn't being prudent. They're behind.

Dorsey was explicit about the reasoning: "Intelligence tools have changed what it means to build and run a company." He said he wrestled with whether to cut gradually over months or years, or be honest and act now. He chose now.

And then he said he was late.

If Dorsey — who moved faster and more decisively than almost anyone — thinks he's late, where does that put every other CEO who's still "evaluating AI strategy" and "exploring efficiency gains"?

It puts them on a clock. And Block just showed them what the clock looks like.

The Precedent Problem

Block isn't the first. It's the biggest and most honest.

Salesforce cut roughly 4,000 customer support roles last year because of AI. Pinterest is cutting 15% to redirect resources toward AI. Dozens of smaller companies have done quiet headcount reductions without saying the word "AI" in the press release.

But Block is different because Dorsey said it out loud. He didn't hide behind "strategic realignment" or "organizational efficiency." He said: AI tools changed the work. The roles aren't needed. We're cutting them.

That honesty matters. Because it gives every other CEO the language to do the same thing.

Before Block, an AI-driven mass layoff was risky. Shareholders might worry about execution. Employees might revolt. The press might savage you. There was social cost.

After Block — after 22% stock appreciation and a CEO who said "we should have done this sooner" — the social cost just collapsed.

The next company doesn't need courage. They just need to point at Block and say: "We're doing what Dorsey did."

Where the 4,000 Go

Dorsey handled this better than 95% of CEOs would. The transparency. The severance. The live video call — "I know doing it this way might feel awkward. I'd rather it feel awkward and human than efficient and cold."

I respect that. I mean it.

But respecting how it was handled doesn't change what happens next for those 4,000 people.

The project managers whose job was coordinating between engineering and product. The operations people who moved information between teams. The support staff. The middle layer that made the organization run.

Those functions aren't shrinking at Block. They're shrinking everywhere. Simultaneously. These people aren't competing for a smaller number of the same role at other companies. The role itself is compressing across the entire industry.

The 20-week severance is generous. It's also a countdown clock. And the job market they're entering in 20 weeks will have fewer of the roles they're searching for, not more. Because between now and then, other companies will see Block's 22% pop and make their own cuts.

The severance buys time. But time is moving faster than the job market.

The Part That Hits Close

Block has offices globally. Some of those 4,000 people are on work visas. Their right to stay in their country is tied to a job that just evaporated.

They now have weeks — not months — to figure out not just their career, but their jurisdiction. Where they're legally allowed to be. Whether their family can stay.

This is what I see in my work. People who built their entire positioning around a single employer in a single country. When that employer makes a decision like this, you don't just lose income. You lose your right to be where you are.

The people who had optionality — savings, transferable skills, relationships across borders — they'll navigate this. Everyone else is scrambling against a clock they didn't know was running.

What I Actually Think

Here's where I stop reporting and start saying what I believe.

Block is the canary. Not because of the layoff. Because of the three signals together.

A profitable company cuts 40% of its people. The market rewards it with 22%. The CEO says he was late.

Those three facts in combination are the most important economic signal of 2026 so far.

Because they create a machine. Company cuts headcount → stock goes up → other companies see the reward → they cut headcount → their stock goes up → the cycle accelerates.

That machine is now running. Block turned it on. And there's no obvious mechanism that turns it off.

The constraint used to be social cost — the reputational risk of mass layoffs. Block just proved there's no reputational risk. There's a 22% reward.

The constraint used to be uncertainty — "Can AI really replace these roles?" Block just answered that question with $6.25 billion in quarterly revenue and 40% fewer people.

The constraint used to be timing — "Is it too early?" Dorsey just said it's too late.

Every constraint that was holding companies back from large-scale AI-driven workforce reduction just got removed in a single earnings call.

I don't know how fast the machine runs. I don't know which companies move next. I don't know the exact timeline.

But I know the incentives. And incentives don't lie.

When the market pays you 22% to fire half your people, people get fired.