Om Malik in his newsletter dissected Jack Dorsey's Block memo about AI-related layoffs. In his memo, Dorsey said Block would cut 40% of the company's staff due to AI creating new ways to work. Malik noted that Block really overhired during Covid and hasn't been run efficiently. In fact, few technology companies are run efficiently because they have lived off the largesse of cloud and high-margin software models.

Malik said:

"In way too many words, what Jack was saying was that AI is here, it is changing how we work, and what it means to be a company. All three points are true. What is also true is that when it comes to technology companies, AI is a convenient narrative that masks a deeper problem.

Operational inefficiencies, over-hiring, and general lack of financial discipline are a common malaise, especially among mid-tier publicly traded tech companies that have lived on the largesse of cloud, mobile, and ZIRP. Block is a poster child, as the data shows."

Fun fact: I was part of an academic research team at Temple University that wrote a business school case study on how Facebook, now Meta, scaled its hiring in 2020. Technology companies panic hired people and reading the Facebook case today is almost comical. Malik's post highlights how technology companies have largely been undoing the great hiring spree from COVID.

Following the headlines about Anthropic's deal with US miliary has been challenging not to mention exhausting. As most of you know by now, Anthropic was blacklisted by the US government, then reportedly used in the bombing of Iran and details are still being reported. Meanwhile, OpenAI now has an agreement with the military and upholds redlines and its guardrails. Here's a roundup of the moving parts you may have missed.

I maintain that the Anthropic battle with the Department of War has turned out to be great for Claude visibility. On Apple's App Store, Claude currently is No. 1. Claude had been somewhere in the 20s before.

AWS has multiple services down in the United Arab Emirates after data centers are without power due to the war in the Middle East. AWS said the facilities in UAE are running on backup power. EC2, Amazon DynamoDB, Amazon S3 and dozens of other services are struggling. In its latest update, AWS said:

"We are actively working to restore power and connectivity, after which we will begin recovery of affected resources; full recovery is still expected to be many hours away. We recommend that affected customers failover, and backup any critical data, to another AWS Region."

Equinix and the Canada Pension Plan (CPP) Investment Board bought AtNorth, a data center provider in the Nordics, for $4 billion including debt. AtNorth will continue to operate under its own brand. CPP owns 60% of AtNorth with Equinix holding 40%.

In a post on X, Block CEO Jack Dorsey said it will conduct layoffs in one swoop instead of cutting gradually.

"Today we're making one of the hardest decisions in the history of our company: we're reducing our organization by nearly half, from over 10,000 people to just under 6,000. that means over 4,000 of you are being asked to leave or entering into consultation. I'll be straight about what's happening, why, and what it means for everyone..."

"We're already seeing that the intelligence tools we’re creating and using, paired with smaller and flatter teams, are enabling a new way of working which fundamentally changes what it means to build and run a company. and that's accelerating rapidly."

Block workers who are cut get salary for 20 weeks plus 1 week per year of tenure. There's also six months of healthcare.

Intuit reported a strong second quarter that topped Wall Street non-GAAP earnings estimates by 47 cents a share. The company reported second quarter non-GAAP earnings of $4.15 a share on revenue of $4.65 billion, up 17.45% from a year ago. Second quarter GAAP earnings were $2.48 a share. Intuit's results were strong across its operating units in the second quarter. The problem was the outlook.

The company projected revenue of $20.997 billion to $21.186 billion compared to estimates of $21.20 billion. That guidance isn't much of a miss, but Wall Street is skittish about software providers.

For the third quarter, Intuit projected revenue growth of 10%.

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Google launched Nano Banana 2, the sequel to the viral image generation and editing model. You didn't know you needed an upgrade, but pretty sure you all will test it out. The model is available via the Gemini API in Google AI Studio and Vertex AI. It is available for use in Google Antigravity and Firebase. Consumers can try the new image model in the Gemini App.

AMD is investing $150 million in Nutanix shares at $36.26 as the two companies are partnering on enterprise AI. The two companies are pursuing a joint roadmap to integrate AMD ROCm and AMD Enterprise AI software into the Nutanix Cloud Platform and the Nutanix Kubernetes Platform, which will use EPYC CPUs and AMD Instinct GPUs. The deal equates to more distribution for Nutanix. AMD will also fund up to $100 million to support joint engineering and go-to-market efforts. Separately, Nutanix reported better-than-expected fiscal second quarter results.

Accenture and Mistral AI said they will co-develop and deliver enterprise AI. The Accenture partnership gives Mistral AI more distribution, but the European LLM player already has multiple partners including SAP and IBM. Accenture will become a customer of Mistral AI.

You'll likely hear a bit of consternation about the lack of pop in Nvidia shares following blowout fourth quarter earnings. Now I can quibble about inventory, investment gains from Nvidia's Intel stake and a few other spots, but the reality is the company keeps delivering stellar results. Here's what's happening: There's no one left to buy Nvidia and it doesn't matter what the company does. Seriously, I'm sure there's some 9 year old who just got an investment account and learned about Nvidia. But everyone else is fully allocated. Nvidia is a place to park money that won't tank. It's Apple.

C3.ai is cutting 26% of its workforce and looking to cut non-employee costs by 30% by the second half of fiscal 2027. C3.ai said it is looking to cut $135 million in non-GAAP operating expenses.

The restructuring plan was outlined in an SEC filing following disappointing third quarter results and outlook. C3.ai reported a fourth quarter net loss of $133.2 million, or 94 cents a share, on revenue of $53.26 million. In the same quarter a year ago, C3.ai delivered revenue of $98.78 million.

As for the fourth quarter outlook, C3.ai sees sales continuing to fall. C3.ai projected first quarter revenue between $48 million to $52 million. CEO Stephen Ehikian said the C3.ai has focused on its core applications, infused AI into business functions, flattened the sales org and cut costs.

Zoom reported fourth quarter earnings of $2.22 a share on revenue of $1.25 billion, up 5.3% from a year ago. Non-GAAP earnings were $1.44 a share.

The earnings results were a nickel a share below estimates.

Zoom owns a stake in Anthropic and that holding likely boosted net earnings.

Zoom saw strength in its fourth quarter enterprise revenue, which was up 7.1% from a year ago. CEO Eric Yuan said Zoom saw double-digit growth in Zoom Customer Experience and paid AI included in its top 10 CX deals.

As for the outlook, Zoom projected first quarter revenue between $1.22 billion and $1.225 billion with non-GAAP earnings of $1.40 a share and $1.42 a share. For the year, Zoom is projecting revenue between $5.065 billion and $5.075 billion with non-GAAP earnings between $5.77 a share and $5.81 a share.

That guidance was mixed relative to estimates.