Block's second-quarter earnings rose 65% year over year to $1.02 per share, driven by AI-powered productivity gains that reduced headcount and raised code output per engineer by 150%.
Although Cash App's user growth slowed to 3%, management expects full-year earnings to grow 70% and is betting that higher margins will fund new products to drive long-term revenue.
At roughly 20 times forward earnings, the stock may be undervalued given the structural cost improvements and accelerating growth in payment volumes and lending.
What happened
Block reported second-quarter adjusted earnings of $1.02 per share on Aug. 5, beating the $0.87 consensus estimate by a wide margin. The company credited AI-driven workforce efficiency—code changes per engineer are up 150% since the start of the year following a 40% workforce reduction announced in February—for lifting profitability. Yet the stock fell about 6% the next day as investors focused on Cash App's monthly transacting actives growing only 3% year over year, down from 4% growth in the previous quarter.
Why it matters
Block management expects full-year earnings to grow by 70%, suggesting the profit lift is structural rather than one-time. The company plans to reinvest higher profits into new products to drive long-term revenue growth. At the same time, other key metrics show momentum: Square's U.S. gross payment volume growth accelerated to 10% year over year, international GPV rose 28%, Cash App consumer lending originations jumped 59%, and commerce enablement volume grew 17%. The stock's 75% decline from its 2021 peak may have priced in a pessimistic view that does not reflect this earnings power.
What to watch
Block trades at about 20 times forward earnings while analysts expect roughly 25% annualized earnings growth in the next several years. Management also expects its Neighborhoods program—which connects Square sellers with Cash App customers—to have a 'massive impact' on Cash App's performance over time.
Ask the AI about this article →
Block's second-quarter results reveal a company in transition, leveraging AI to improve margins while accepting slower headline user growth in exchange for higher unit economics. The workforce reduction in February—a 40% cut justified by AI-driven productivity gains—has already shown structural impact: code changes per engineer jumped 150% since the start of the year, and management's 70% full-year earnings guidance suggests these efficiency gains are not temporary. This stands in sharp contrast to the market's initial read, which dismissed the beat as a one-time event and punished the stock on slowing Cash App user additions.
However, the data paints a more nuanced picture. While Cash App's monthly transacting actives grew only 3% year over year—a deceleration from 4% the prior quarter—other business segments show accelerating momentum: U.S. gross payment volume growth jumped to 10% year over year, international GPV surged 28%, consumer lending originations rose 59%, and commerce enablement volume grew 17%. The company is also building new levers for growth, including the Neighborhoods program, which management believes will have a 'massive impact' on Cash App's performance over time. At a valuation of roughly 20 times forward earnings with analyst expectations for 25% annualized earnings growth in the coming years, the stock appears to reflect deeper skepticism than current fundamentals warrant.
For example, today's edition would include:
AI-summarized, only the topics you pick — one digest a day via Email, Slack, or Discord.
Free · takes 30 seconds · unsubscribe anytimeWhat is AIToday? →
Ask AI anything about this article. Q&As are published on this page for other readers too.
Phonely Ltd. launched Alma, a large language AI model built for voice agents and trained on over 10 million re…
Aranya Inc., a startup founded last year, launched today with $11 million in funding
CBTS Technology Solutions LLC launched Forge Agents, a platform that turns a plain-language job description in…
Imec CEO Patrick Vandenameele said at SEMICON Taiwan 2026 that the Belgian research center is broadening its c…
Alphabet's AI Overviews now reach over 2.5 billion monthly users through Google Search, and its ad business ge…
Sarah O’Connor's book 'We Are Not Machines' explores how mechanization and AI have transformed the workforce…
