I just noticed that the logic behind Block's massive layoffs might be much deeper than it appears on the surface.

The company has now cut its staff to around 6,000 people, roughly returning to pre-pandemic levels in 2019, down nearly 40% from the peak of over 10,000 in 2023. Jack Dorsey said this was to improve efficiency with AI, which sounds reasonable, but I think the real pressure comes from elsewhere.

Transaction fees for payment cards have long been Block's main revenue source, with merchants paying 2-3%. The problem is that stablecoin payments are gradually eating into this market. With the rise of AI-assisted shopping—machines automatically comparing prices, optimizing payment routes, executing transactions—the entire payment landscape is changing. In this scenario, transactions are almost frictionless, with fees approaching zero. AI prioritizes price and speed over brand loyalty.

When a transaction fee drops from 2-3% to just a few cents, the traditional payment network business model begins to shake. This isn't just competitive pressure; it's structural cost compression. Block is facing this deep-seated change, not merely the need to cut costs.

In fact, Block has been adjusting for some time. Earlier this year, they launched a 10% layoff plan, during which Dorsey openly admitted that the company's growth was outpacing its business and revenue growth—that was a correction for overexpansion during the pandemic. But now, the scale of layoffs is much larger, with a 40% cut indicating they are dealing with not only redundancy but also the structural shifts within the payments industry itself.

The market seems to understand this. Block's stock price rose over 23% in after-hours trading, as investors readily accepted this aggressive cost-cutting. However, the stock is still about 80% below its pandemic peak, indicating that market expectations for the company have already been significantly re-priced.

Stablecoins have existed throughout the expansion, but they were mostly seen as tools for crypto trading. Only recently, with clearer regulatory frameworks—such as the GENIUS Act and Circle's IPO—dollar-backed tokens are starting to be viewed as genuine alternatives to traditional card payments. This is the real change Block needs to adapt to.

Some analysts say this could mean AI will destroy everything, but others point out that perhaps Block just hired too many people initially, and now AI has become a convenient excuse. Regardless, the company is recalibrating itself to adapt to a world where payment costs may permanently decline. This is a significant signal for the entire industry.