AI Job Destruction Accelerates

"Earnings calls have become increasingly outlets for CEOs to say they need fewer people because of AI. Or, they may need fewer people, but are not sure. Or, their AI will make the people they have more productive. The number of AI-driven layoffs is certainly rising. Yesterday, Challenger Gray announced that layoffs in April were heavily driven by AI's efficiency gains, resulting in fewer workers."

"Internet infrastructure and cybersecurity company Cloudflare ( NYSE: NET | NET Price Prediction) said it would cut about 20% of its staff, representing over 1,000 people. In its quarterly press release, it disclosed, "We currently estimate that we will incur charges of $140.0 to $150.0 million in connection with the plan, consisting primarily of cash expenditures for notice period, severance payments, employee benefits, and related.""

"The other part of the press release shows revenue was up 34% to $649 million. The company reported a net loss of $23 million, compared with a loss of $38 million in the same period a year ago. It gave Wall St. what it considered less-than-stellar guidance. After hours, the stock plunged 17%. Barron's said that Cloudflare's results were simply not enough to satisfy wild expectations about its future."

"There is disagreement about why these layoffs have occurred. The first theory is that companies have found AI extremely beneficial for productivity. The other is that companies have gotten out over their skis, but want to satisfy Wall St's hunger for a world of tremendous worker efficiency before that efficiency is actually in place. Which theory about AI layoffs is correct may be years away."

Earnings calls increasingly feature claims that AI will reduce headcount, increase productivity, or both. AI-driven layoffs are rising, with Challenger Gray reporting April layoffs heavily driven by AI efficiency gains. Cloudflare announced cutting about 20% of staff, over 1,000 people, and estimated $140.0 to $150.0 million in charges for notice period, severance, benefits, and related costs. Cloudflare reported revenue up 34% to $649 million and a net loss of $23 million, compared with a $38 million loss a year earlier, while providing guidance viewed as less-than-stellar, sending the stock down 17% after hours. Block previously announced a 40% workforce reduction. Explanations differ between real productivity benefits and attempts to meet Wall Street expectations before those benefits fully materialize.

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