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Hyunsoo Rim2/27/26

Block soars after announcing 40% workforce cut amid AI push

Block, the payments and fintech firm led by Twitter cofounder Jack Dorsey, is up almost 20% in premarket trading after announcing plans yesterday to cut 40% of its 10,000-person workforce.

Alongside the layoff announcement, Block reported $6.25 billion in Q4 revenue, slightly ahead of expectations, while gross profit for the quarter grew 24% year on year. The company also raised its full-year guidance for both gross profit and operating income.

In a post on X, Dorsey said the decision wasn’t made because the company is in “trouble,” instead framing the move as a structural shift. Indeed, Block has invested heavily in internal AI tools, including launching its own system called Goose in early 2025. In a letter to shareholders, Dorsey said “a significantly smaller team” using these tools “can do more and do it better.”

Most of the layoffs will occur in Q1 and will be “substantially” completed by the end of Q2, with expected restructuring charges of approximately $450 million to $500 million, according to an SEC filing.

Block is the latest company to tie job cuts to AI in Corporate America. Outplacement firm Challenger estimates roughly 55,000 US layoffs were attributed to the technology in 2025, almost 13x the level two years ago. Dorsey predicted that most companies “will reach the same conclusion and make similar structural changes” within the next year.

The company had more than tripled its headcount from the end of 2019 through 2022, with its number of employees rising from 3,845 to 12,428. When presented with this tidbit, Dorsey acknowledged on X that “yes we over-hired during covid because i incorrectly built 2 separate company structures.” Last year, Block spent roughly $68 million on an event for employees, which reportedly featured performances from T-Pain and Soulja Boy.

Despite the rally, Block remains more than 75% below its 2021 peak.

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Helena Cheng13h

Lululemon’s stretch getting tested: Stock plunges after after outlook is cut

Lululemon shares are down double digits in premarket trading after the company cut its full-year sales and profit outlook, overshadowing a Q1 beat and raising fresh concerns about the brand’s turnaround efforts.

The company now expects fiscal 2026 revenue to be flat to down 1%, compared with its prior forecast for 2% to 4% growth. Guidance for full-year diluted earnings per share was dragged down to a range of $10.95 to $11.15, below the company’s previous guidance of $12.10 to $12.30 and well below Wall Street’s estimate of $13.26.

Key numbers for Q1:

EPS of $1.69 vs. the $1.68 expected.
Revenue of $2.47 billion vs. the $2.43 billion expected.

The modest top-line beat masked a widening divergence between Lululemon’s geographic markets. While international revenue rose 22% overall with a 30% increase in Mainland China, the bigger problem remains North America, where revenue fell 5%.

Interim co-CEO and CFO Meghan Frank acknowledged during the earnings call that recent product rollouts underperformed. A highly anticipated yoga campaign failed to generate its expected “halo effect” across broader product lines.

Profitability metrics took a major hit, with gross margins contracting by 410 basis points to 54.2% due to mounting tariff costs and promotional markdowns. Operating income consequently fell 37% year over year to $276.9 million.

“We experienced spikes of negative commentary in the media and on social channels with regard to our brand, which had an impact on traffic and overall top-line performance,” Frank said during the earnings call. “And second, not all of our product launches have met our expectations. While we have had several successful launches so far this year, we have seen others as we start Q2 not generate the anticipated guest response.”

Lululemon’s valuation has already been steadily compressing for years. While it was once one of retail’s richly valued stocks, investors have been questioning whether the company can return to the double-digit growth era.

The results also arrive during a leadership transition. Lululemon announced back in April that former Nike executive Heidi O’Neill is set to take over as CEO in September, with investors looking to her to revive growth in North America and restore the brand’s growth.

As Lululemon faces both macroeconomic pressure and brand-specific challenges, its stock has dropped around 40% year to date.

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US job growth skyrocketed in May, blasting past expectations

The US economy added 172,000 jobs in the month of May, the Bureau of Labor Statistics reported Friday, sending 10-year Treasury yields higher.

The strong May job market surprised economists. Experts had predicted only 85,000 new jobs — just half the reported number. The unemployment rate held steady at 4.3%, as expected.

The job growth story is a hopeful spot for the economy as consumers continue to feel inflationary pressure from the Iran war.

Job gains were buoyed by the leisure and hospitality sector, which added 70,000 jobs, as well as local government, healthcare, and education.

Both the March and April jobs reports were revised upward, making them collectively 93,000 higher than previously reported.

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