Wall Street Isn’t Buying the AI Layoff Story. Here’s What the Numbers Say.

By Aby Varghese July 26, 2026 7 min read

There is a script every major tech company follows when announcing AI-driven layoffs in 2026. First, cite a bold pivot toward an “AI-first” future. Then, explicitly deny replacing workers with AI. Finally, project confidence about revenue growth. Monday.com ran through all three steps on July 22 when it announced cuts of roughly 620 employees — 20% of its global workforce — framing the move as adapting to a “new vision of doing the work with AI and not just managing it.”

The market’s response to that framing, however, has been consistent and damning. According to Financial Times analysis, companies that cited AI as a factor in job cuts underperformed the Nasdaq by almost 10% in the 30 trading days following their announcements. That is not a rounding error. It is a systematic signal that investors do not believe the story being told.

The AI Layoff Wave Is Real — But So Is the Skepticism

The scale of AI-attributed job cuts in 2026 is genuinely unprecedented. AI has been the leading stated reason for US job cuts for four consecutive months this year — a streak with no historical precedent in outplacement records. Through June, AI was cited in over 100,000 US layoff announcements, representing approximately 23% of every job cut tracked across the entire economy. US tech companies alone have slashed nearly 140,000 jobs since January, with Amazon, Oracle, Meta, and Microsoft accounting for close to 50,000 of those cuts combined.

Furthermore, companies are not cutting from positions of weakness — at least not on paper. Cloudflare cut 20% of its workforce (1,100 people) while reporting its highest quarterly revenue ever: $639.8 million, up 34% year-over-year. Oracle disclosed 21,000 cuts over 12 months while posting $3.7 billion in quarterly net income, up 27%, with remaining performance obligations up 325% to $553 billion. GitLab laid off 14% of staff while reporting 23% revenue growth. The numbers do not suggest companies in crisis. They suggest companies making a deliberate structural bet.

The Language of Denial

What is striking across this wave is how carefully each company has constructed its denial. Monday.com co-founder Eran Zinman told employees the decision “was not made to reduce costs or replace people with AI.” Cisco CFO Mark Patterson said the cuts were “really not a savings-driven restructure.” Atlassian CEO Mike Cannon-Brookes acknowledged that “AI doesn’t replace people” — then added, with more candor than most, that “it would be disingenuous to pretend AI doesn’t change the mix of skills we need or the number of roles required in certain areas.”

That last admission is the closest any CEO has come to saying plainly what the data suggests. When Coinbase CEO Brian Armstrong writes that “engineers use AI to ship in days what used to take a team weeks,” the implication is unavoidable: fewer engineers produce the same output. When Salesforce says “because of the benefits and efficiencies of Agentforce, we’ve seen the number of support cases we handle decline,” it is describing AI displacement of support roles, whatever label it applies to the process.

Investors appear to read the subtext. The 10% Nasdaq underperformance is not punishment for cutting jobs — markets typically reward efficiency gains. It is more likely a signal that investors doubt the AI transformation narrative itself, or question whether these companies can execute on it at the speed being implied. Restructuring charges are certain; the AI revenue upside is not.

Where the Money Is Actually Going

The picture is not uniformly negative. Anthropic and OpenAI are hiring rapidly, absorbing a portion of the talent displaced elsewhere. Meta moved roughly 7,000 employees into new AI-focused roles even as it cut 8,000 others. IBM says it plans to triple US entry-level hiring for AI and hybrid-cloud positions alongside its own cuts. Amazon still had open AI roles even while eliminating 16,000 corporate jobs in January.

This pattern — cutting in one area, hiring in another — is what genuine transformation looks like. However, the net headcount figures tell the real story. Dell’s total workforce fell roughly 10% in fiscal 2026. Block cut nearly half its entire staff, dropping from over 10,000 to under 6,000 employees. PayPal announced plans to eliminate north of 4,500 jobs over two to three years. In aggregate, the industry is shrinking its human workforce while expanding its AI infrastructure spend. The two trends are directly connected.

Monday.com’s shift is perhaps the most structurally significant signal yet. The company is replacing its seat-based subscription model with a “seats plus AI credits” hybrid, where human users pay subscription fees while AI agents accrue usage-based charges. Gartner projects at least 40% of enterprise SaaS spend will shift to usage, agent, or outcome-based models by 2030. Monday.com is not just cutting costs — it is restructuring the entire commercial logic of its business around a world where AI agents are billable units alongside human ones.

What the Market Is Actually Pricing In

The 10% Nasdaq underperformance figure deserves careful interpretation. It does not mean layoffs are bad for stock prices — historically, they often produce short-term gains. It means that when AI is the stated reason, markets apply a discount. That discount likely reflects three concerns.

First, restructuring charges are immediate and certain. Monday.com expects $45 to $55 million in charges; GitLab projected $30 to $35 million; Cloudflare and Snap took similar hits. These costs land in the quarter they are announced and reduce near-term earnings.

Second, the AI revenue upside being promised is speculative. “AI Work Platform” is a vision, not a product line with proven unit economics at scale. Investors have seen enough pivot narratives to know that rebranding a cost cut as a strategic transformation does not guarantee the transformation materialises.

Third — and most significantly — the sheer uniformity of the messaging has made it less credible. When every company from a crypto exchange to a project management platform to a social media app uses identical language to describe its AI pivot, the language loses signal value entirely. The market discounts noise.

The Honest Version of This Story

Jack Dorsey, cutting nearly half of Block’s workforce in February, offered the most unfiltered version of what is happening: “Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes.” He did not claim it was painless, strategic, or unrelated to replacing human effort with AI capacity. He said it was inevitable and that most companies were late.

That honesty is rare. Most companies need the layoff to look like a strategic pivot because the alternative — admitting that AI has made a portion of your workforce structurally redundant — carries legal, reputational, and employee relations risks that no communications team wants to manage. The denial is functional, not necessarily dishonest.

However, the market sees through functional denials. The Nasdaq underperformance figure is the clearest evidence yet that investors are applying their own translation layer to AI layoff announcements — and arriving at a more sceptical conclusion than the press releases suggest.

Whether that scepticism is ultimately correct depends on whether the AI transformation being promised actually materialises in revenue. For most of the 21 companies on this list, that answer will arrive in their next two or three earnings cycles. The announcements have been made. Now comes the part that is harder to script.

Frequently Asked Questions

Why are so many tech companies citing AI as a reason for layoffs in 2026?

AI tools have made certain roles — particularly in support, middle management, and repetitive engineering tasks — less necessary at the same headcount levels. Companies are restructuring to operate leaner teams augmented by AI agents, though the degree to which AI is the true driver versus cost-cutting varies by company.

Did the stock market reward companies that announced AI-driven layoffs?

No. Financial Times analysis found that companies citing AI as a factor in job cuts underperformed the Nasdaq by almost 10% in the 30 trading days after their announcements — suggesting investors are sceptical of the transformation narratives, even when the underlying companies remain profitable.

Is Monday.com’s layoff different from others on this list?

Structurally, yes. Monday.com is not just cutting headcount — it is shifting its entire revenue model from seat-based subscriptions to a hybrid that charges for AI agent activity. That makes it one of the clearest examples of a company redesigning its commercial architecture around AI, rather than simply reducing costs.

Which companies have been most transparent about AI replacing workers?

Block’s Jack Dorsey and Coinbase’s Brian Armstrong offered the most direct framing. Dorsey said most companies would reach the same conclusion within a year; Armstrong explicitly stated that AI enables engineers to ship in days what used to require a full team over weeks. Most other CEOs have been considerably more cautious in their public language.

About the author

Aby Varghese

AI and software enthusiast passionate about web technologies, automation, and developer tools. Writes about AI, testing, and modern software engineering.