By Nate Wolf
Fears of widespread white-collar layoffs have intensified -- and, in some cases, been realized -- over the first quarter of 2026.
The poster child for those worries is Block, which laid off 40% of its workforce at the end of last month. Artificial intelligence tools, CEO Jack Dorsey said, allowed for a "significantly smaller team" to "do more and do it better."
Reuters then reported this week that Meta Platforms is planning cuts to 20% of its workforce of nearly 79,000 people. Meta called the story "speculative reporting about theoretical approaches."
The question on workers' minds now: Who's next? Analysts covering payments, processors & technology services at BofA Securities asked just that in a research note, identifying Klarna, PayPal Holdings, and Rocket Companies as companies in their universe to watch.
BofA started by estimating the average costs of employees at 16 companies and modeling the potential gain in 2027 per-share earnings they would realize by slashing 10% of their workforces. About half of the companies analyzed saw double-digit percentage gains, which may be an ominous sign for workers in the industry.
"The market will likely continue to reward AI-driven headcount cuts most at low-margin companies where the EPS accretion is compelling," wrote analyst Matthew C. O'Neill.
Klarna had the highest potential earnings gain at 24%, reflecting costs linked heavily to personnel. The buy now, pay later company has been explicit that AI will transform its operating model. CEO Sebastian Siemiatkowski quantified the shift earlier this year, predicting Klarna would have 2,000 workers by 2030, down from around 3,000 today.
Asked whether layoffs are part of the plan, a Klarna spokesperson told Barron's the reduction would come from natural attrition.
After replacing its CEO last month, PayPal is another company BofA is keeping an eye on. The company would enjoy a 9% jump in earnings per share next year if it pursues a 10% headcount cut, according to BofA's model. New CEO Enrique Lores may also see an opportunity to reset long-term expectations.
"We believe that investors would be very receptive to an announcement of further cuts communicated with a similar message to Block's that recent substantial AI capability improvements is enabling further reductions," O'Neill wrote.
PayPal, which has laid off staff on multiple occasions in recent years, declined to comment. Steve Winoker, the company's chief investor relations officer, said in early February that PayPal was "using AI to leverage our cost base and redirect spending to innovation."
For mortgage lender Rocket Cos., BofA modeled a 12% bump to earnings. Rocket has built up its loan origination capacity in anticipation of a larger mortgage market, but homebuying could remain soft if interest rates stay higher for longer. That dynamic would raise the chances of an "AI-driven layoff cycle," O'Neill said.
Rocket didn't respond to Barron's request for comment.
To be sure, short-term earnings gains aren't the only thing companies and investors should care about. Companies often maintain or add headcount to execute growth strategies, and the impact of layoffs on publicity and morale can be crippling. Even Block has given up most of its immediate stock gains after the layoff announcement.
We also still don't know how much more efficient AI can make companies absent the workers who use the technology.
"There's plenty of evidence that AI is boosting productivity by helping workers to do their jobs better," Ben May, director of global macro research at Oxford Economics, wrote in a report Thursday. "And even in sectors highly exposed to AI disruption, rises in job hires suggest that AI is creating new positions as well as triggering layoffs."
Write to Nate Wolf at nate.wolf@barrons.com
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March 19, 2026 12:57 ET (16:57 GMT)
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