So, Block Inc. (XYZ) had quite a Friday. The fintech giant's stock shot up over 15% after it did two things that Wall Street loves: it posted a blowout fourth quarter, and it announced it's firing a whole lot of people. Specifically, the company is cutting its workforce by about 40%—from over 10,000 employees to under 6,000. That's roughly 4,000 jobs. It's a brutal move, but investors are betting it will turbocharge margins and reshape the company's earnings power as it shifts to what it calls an "AI-native" operating model.

Analysts are on board with the plan. Needham's Mayank Tandon reiterated his Buy rating on the stock and, more importantly, raised his price target from $80 to $90. He's betting that the deep staff cuts, combined with accelerating momentum in the Cash App business, will make Block a lot more profitable.

The Numbers That Made Everyone Happy

Let's start with the good news from Q4. Block beat estimates on pretty much every important metric. Gross profit jumped 24% year-over-year to $2.87 billion, which was better than what Tandon or the broader market consensus expected. Adjusted earnings per share came in at 65 cents, topping estimates of 63-64 cents.

The story was a bit of a split screen between Block's two main businesses. On the Square side, gross profit grew 7.5% year-over-year. Gross payment volume was up 10%, driven by strong growth in food and beverage (up 16%) and continued strength with mid-market sellers. There were some headwinds—hardware sales and higher processing costs each created about a 2-percentage-point drag—but overall, the trends are improving.

The real star of the show, though, was Cash App. Its gross profit skyrocketed 33% year-over-year to $1.83 billion. That growth was fueled by newer products like Borrow (its lending feature), Afterpay post-purchase options, and the Cash App Card. It's clear this app isn't just for sending your friend $5 for coffee anymore; it's becoming a more full-featured financial hub.

The Big, Painful Restructuring

Now, about those job cuts. Tandon highlighted that this massive restructuring—slashing the workforce from over 10,000 to under 6,000—is central to Block's shift toward an AI-driven operating model. The idea is that by becoming "AI-native," the company can do more with less. It's a bet on efficiency.

The analyst believes this move should significantly increase profitability and support the stock price. He expects the workforce reduction to drive "meaningful margin expansion," with fiscal 2026 adjusted operating income now projected to soar 54% year-over-year. In other words, cutting costs is about to give earnings a major boost.

A Much Brighter Future (On Paper)

All this optimism is reflected in Block's newly raised guidance. The company didn't just have a good quarter; it told everyone the next few years look a lot better too.

For the current first quarter, Block expects gross profit of $2.80 billion (up 22% year-over-year and above consensus) and adjusted operating income of $600 million (versus a $570 million consensus).

The real eye-opener is the fiscal 2026 outlook. Block now projects:

• Gross profit of $12.20 billion, representing 18% growth. That's above its prior guidance of roughly 17% and above the $11.94 billion consensus.
• Adjusted operating income of $3.20 billion, which implies a 26% margin. This crushes the prior guide of $2.70 billion and the consensus estimate of $2.50 billion.
• Adjusted EPS of $3.66, well above the $3.19 consensus.

Tandon updated his own estimates to reflect this stronger outlook. The message is clear: Block's growth strategy is working, and the massive cost-cutting is set to amplify the financial benefits.

By the end of trading Friday, Block shares were up 15.20% at $62.82. It's a classic Wall Street story: strong growth plus deep cost cuts equals a soaring stock. The human cost of those 4,000 lost jobs is a separate, heavier conversation. But for investors right now, the math looks compelling.