Block's AI-Native Restructuring Scare Gives Way to a 30% Rally

A headline-grabbing plan to cut 40% of staff initially spooked investors, before accelerating Square and Cash App growth won them back.

10 Aug 2026 · 3 min read

Block delivered a genuinely strong operating result in March 2026 that arrived alongside a headline-grabbing letter from chief executive Jack Dorsey explaining plans to cut more than 4,000 roles, 40 percent of staff, as the company moves to an AI-native operating structure. The stock initially fell on any perceived imperfection in results, but has since rallied more than 30 percent from its March low on accelerating growth and takeover speculation swirling around rival PayPal.

A strong result overshadowed by a mass layoff announcement

First Samuel said Block's March update landed as two stories at once: a very strong operating result, and a now-famous letter from Jack Dorsey explaining why the company could remove more than 4,000 roles, 40 percent of its staff, even as the business was performing well, with investors clearly finding that logic credible enough in the near term. ELM Responsible Investments confirmed healthy gross profit growth and upgraded medium-term profitability targets as the business transitioned toward an AI-native operating structure, but noted share price reactions had become sharply negative to any result perceived as less than perfect, particularly among higher-multiple names, without viewing that volatility as evidence of any structural deterioration. Oracle Advisory Group took the opposite view, selling its position entirely during the quarter.

Block's latest financial update landed as two stories at once: a very strong operating result, and a now-famous Jack Dorsey letter explaining why the company could remove more than 4,000 roles, 40% of its staff, even as the business was performing well.

— First Samuel, Article, March 2026

PayPal takeover speculation lifts the whole payments sector

Pendal Group said Block was supported in July by takeover speculation surrounding PayPal, with investors drawing favourable read-throughs for scaled payment platforms and global two-sided networks generally. Reports that Stripe and private equity firm Advent had approached PayPal with a US$60.50-a-share offer, with subsequent suggestions Block itself could participate, underlined the strategic value the market is placing on large payment ecosystems.

August's result confirms the AI-native restructuring is paying off

Pendal Group said Block's second-quarter result beat expectations across gross profit, operating income and earnings per share, prompting an upgrade to FY26 guidance, with gross profit up 25 percent year on year on accelerating momentum in both its Square and Cash App businesses, and encouraging signs of accelerating gross payment volume growth in Square's US seller business. First Samuel, which has held Block since early 2025 and counts it a top-ten position in many client accounts, said it has returned around 60 percent, giving the portfolio exposure, alongside Macquarie, Challenger and EarlyPay, to financial companies built around services and innovation rather than interest margins protected by oligopoly and regulation, with gross profit rising 25 percent to US$3.17 billion.

It gives us exposure to financial companies built around services and innovation rather than interest margins protected by oligopoly and regulation.

— First Samuel, Article, August 2026

What fund managers say they are watching next is whether the AI-native restructuring sustains service quality and growth with a much smaller workforce, continued momentum across both Square and Cash App, whether PayPal takeover speculation develops into a broader payments sector re-rating catalyst, and delivery against Block's upgraded FY26 guidance.