Block：大胆裁员40%的目标；是人工智能的重大时刻还是组织臃肿的特殊缩减？

Harshita Rawat, CFA+1 917 344 8485 Block Inc Price Target Block: The audacious goal to reduce headcount by 40%; a seismicmoment for AI or idiosyncratic reduction of organizational bloat? We will skip the earnings recap (beat and raise; Cash App Borrow helped) and get straightto the news - Block announced ~40% headcount reduction in a somewhat strong quarter, alevel of restructuring that we haven’t seen from a major firm in a long time (ironically, last timearound it was Twitter).The announcement highlighted both the worst and the best of what AIcould do with respect to unemployment and massive productivity gains - if Block pulls this offwithout major disruption. Over the years, we have been publishing a headcount benchmarkingand efficiency analysis (primarily to highlight how historically inefficient Block was).In thisnote, we update that headcount analysis, and offer insights from what we can inferfrom Block’s headcount action- how much of that was organizational bloat, how muchcould be AI-driven productivity gain (or the sheer ambition of it). Now, someone can argue that Block is not exactly a poster-child of an efficiently runcompany. The headcount, while down ~21% since 2023, was up 150%+ vs. 2019 (grantedgross profit was up 400%+ over the same time frame). Historically, there have been duplicatecost functions across Block (across Cash App and Square). In fact, we had been writing aboutinefficiency at Block for years since 2022. Post Twitter acquisition, Elon Musk slashed 80%of its headcount (and that was before AI). All that said, Block’s headcount actions cannot be explained by ‘bloat’ - that problemwas somewhat solved from 2023-2025(headcount was down ~21% in that time period).In fact, exiting 2025, Block’s Gross Profit/Employee (adjusted for P2P costs and risk-losses) was $800K/employee - vs. peers such as PayPal, Adyen and Stripe at $550-700K(Exhibit 1). V and MA are much higher at $1.1M/$800k respectively. Implied in Block’sguidance for 2026 is GP/Headcount of $1.5M - exceeding the levels seen at large techgiants.[continued on next page] Investment Implications We rate Block OP. Our 2026 adj. OI is revised up 16%, 2027 by 26%. Despite the increasein our estimates, we stick with our TP of $85 as we still lack full visibility on the consumerimpact of AI disruption. See the Disclosure Appendix of this report for required disclosures, analyst certifications and otherimportant information. Alternatively, visit our Global Research Disclosure Website. DETAILS [continued from prior page] Many people (including us) have had this nagging feeling since late last year - an aha moment of sorts, that something haschanged. The models have gotten much better - capable of far more complex reasoning. Jack Dorsey alluded to that andmore.Even though Block held its investor day just this past November,headcount reductions of this magnitude weren’tcontemplated at that time,but the company’s thinking changed as models got an order of magnitude betterin Dec’25.The functionalization of the company over the last year also helped. Jack Dorsey noted that the cuts were a deliberatechoice for next phase of growth, focused on intelligence, extreme prioritization and speed. While not targeted at a particulardepartment, Block noted that it followed a bottom-up approach, looking at roles that could be most viably automated, withfewer eliminations in areas that were revenue generating (e.g. field sales) and/or critical to operations. We estimate ~$750m in personnel related savings in 2026 (~$1B annualized) but it appears that the revised Adj. OIguide (up by ~$500m) embeds only ~$350mof benefit from the cuts (the rest coming from top-line increase, adjusted forhigher risk costs). Management noted plans for reinvestment (hard to handicap numerically, but likely a few hundred milliondollars) in product innovation and in scaling go-to-market for customer acquisition (sales, marketing and partnerships) aswell as in people, hiring (e.g. senior AI engineers) and retaining talent. The company is also actively investing in building its AIinfrastructure in-house, including tools and capabilities that will further drive internal efficiency. This level of headcount reduction is highly disruptive, an audacious goal that, if successful, could prove to be aplaybook for other companies.While Block has noted that they are taking a deliberate and strategic approach to theheadcount reduction, paying special attention to protecting and even reinvesting in revenue-generating roles (e.g. field sales arenot impacted), there is always a risk in this transition, and it is possible that headcount crawls up over subsequent years in otherareas. All that said, we do wonder if this will lend some credence to the white-collar unemployment fearswhich have grippedthe markets recently. Maybe this is not a permanent headcount impact, but a temporary one before headcount grows elsewhere(or perhaps Block is an extreme case). The companies’ gloves seem t