During the fourth quarter of 2025, Block (XYZ 0.90%) reported 24% year-over-year growth in gross profit. And it posted an adjusted operating margin of 20%. However, this wasn't why the fintech stock popped 24% following its earnings release on Feb. 26.
So, what exactly is going on with Block stock?
Image source: Block.
The company's latest financial results were masked by a massive round of layoffs. CEO Jack Dorsey announced that Block would be letting go of more than 4,000 employees, going "from over 10,000 people to just under 6,000." The reason: Artificial intelligence (AI) tools are being built that allow the business to operate in a more efficient manner.
Perhaps even more startling was Dorsey's forecast for the rest of the corporate world. "Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural change," he said on the Q4 2025 earnings call. Investors can't ignore this possibility.
NYSE: XYZ
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I think it's worth entertaining the argument that the business might have overhired in previous years. And now, it's placing the blame on AI for the headcount reduction, as opposed to strategic mismanagement on the leadership team's part.
For shareholders, the immediate bullishness is probably supported by the belief that this drastic move will lift Block's profitability quickly. Analysts expect adjusted diluted earnings per share to soar 50% this year.
