Block (NYSE:SQ), the financial technology company led by founder and CEO Jack Dorsey, recently announced that it is laying off as much as 10% of its workforce.
This move to reduce staff comes days after Block reported decent third-quarter results — and at the same time Dorsey announced plans to take a more hands-on role as CEO. SQ stock is up nearly 4% today on news that the company will let roughly 1,300 employees go, based on the current headcount of about 13,000 workers globally.
The Block Layoffs: Strong Q3 Numbers
On Nov. 2, Block reported third-quarter financial results that were so strong they sent SQ stock more than 15% higher in a single trading session. The company announced EPS of 55 cents versus the 47 cents expected among analysts. Meanwhile, revenue totaled $5.62 billion versus the $5.44 billion that was anticipated.
Additionally, Block raised its forward guidance, saying it now expects full-year operating income of between $205 million and $225 million, a big increase from previous guidance of only $25 million. The company also said that it expects a 2023 gross profit of between $7.44 billion and $7.46 billion. Block, which is a major holder of crypto, said that its Bitcoin (BTC-USD) revenue in Q3 rose to $2.42 billion from $1.76 billion a year earlier.
As CNBC reports, Dorsey said that the firm plans to focus on “targeting local restaurants and services businesses to grow” and to “refocus engineering talent using artificial intelligence technology” moving forward.
Stock Performance and Short-Seller Report
Despite the strong Q3 print and subsequent move higher, SQ stock has been a poor performer since the market downturn that took hold in November 2021. So far this year, Block’s share price has fallen 20%. Over the past five years, the stock is also down about 30%. Worst of all, SQ stock is down by around 80% from the all-time high it reached in 2021.
Weighing on SQ stock in recent months has been a critical report from notorious short seller Hindenburg Research that came out in March 2023. The short report claims that Block falsely inflates its Cash App user numbers and takes a “‘Wild West’ approach to compliance” and internal control systems. The report also accuses Block of helping to facilitate “criminal activity” and alleges that “fraud [runs] rampant on its platform.” Hindenburg Research’s allegations have dragged SQ stock lower this year and shares have yet to fully recover.
What’s Next?
All told, it looks as though Jack Dorsey is trying to build on the momentum of Block’s recent Q3 earnings report by reducing costs through a reduction in staff. Judging by the market’s positive reaction to the news, investors seem to support the layoffs. SQ stock shareholders likely see the headcount reduction as more evidence that Block is getting its house in order and working to improve its operations and finances.
On the date of publication, Joel Baglole did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
