Eight months after Jack Dorsey made one of corporate America’s boldest bets on shrinking its workforce to prepare for the age of artificial intelligence, investors are finding more reasons to buy into the Silicon Valley billionaire’s pivot.
Shares of Dorsey’s Block (XYZ), the payments company behind Cash App and merchant processor Square, jumped more than 9% in premarket trading Wednesday after it reported better-than-expected third quarter earnings and raised its gross profit outlook for next year.
Investors embraced Dorsey’s somewhat controversial decision in February to let go of 40% of Block’s workforce, or about 4,000 jobs. The stock continued to climb through the spring and summer before giving back some of those gains in September.
The company gave more evidence of the financial benefits from its sweeping workforce reduction. Gross profit at Block rose 22% in the third quarter from a year ago to $3.2 billion, while adjusted operating income surged 92% to $923 million as Block benefited from lower personnel costs.
Block also projected total gross profit next year to be $14.52 billion, or roughly $110 million ahead of Wall Street’s expectations, according to BTIG.
“We believe we’ve meaningfully crossed the chasm of transforming our company from one that creates traditional financial products into one that streams intelligence as people need it,” Dorsey wrote in Block’s third quarter shareholder letter.
Executives also provided more details on Block’s artificial intelligence strategy, with Dorsey highlighting how Block plans to turn some of the AI tools it has developed into new sources of revenue.
During Tuesday’s earnings call, Dorsey said Block intends to use its Buzz AI agent platform to replace a number of external software vendors while offering similar tools to other businesses.
The company began testing Buzz with prospective customers in October and expects to generate its first revenue from AI tools in the fourth quarter.
Follow David Hollerith on X @DsHollers.