Key Takeaways:
Block reported Q2 adjusted EPS of $1.02, beating consensus by 15 cents, yet shares fell 6% on slowing Cash App growth.
"That way of working ultimately drives improved efficiency over time and greater leverage to our business over time," CFO Amrita Ahuja said.
Adjusted earnings came in at $1.02 per share, above the $0.87 consensus estimate and up 65% from $0.62 a year earlier. The company cut 40% of its workforce in February, citing AI tools that boosted code changes per engineer by 150% since the start of the year. Square's U.S. gross payment volume grew 10% year over year, with international GPV up 28%. Cash App consumer lending originations rose 59%, and commerce enablement volume grew 17%.
The stock's 6% decline puts it at about $79, roughly 20 times forward earnings, while sell-side estimates project 25% annualized earnings growth. Management expects full-year earnings to grow 70%, with the next earnings report scheduled for Nov. 5.
Cash App monthly transacting actives grew just 3% year over year, a deceleration from 4% in the prior quarter, as mobile payments competition intensifies. Management guided for low-single-digit percentage growth for the full year, prioritizing value per user over raw user growth. The Neighborhoods program, which connects Square sellers with Cash App customers, is expected to have a "massive impact" on Cash App performance over time.
The earnings beat extends a streak of positive surprises. Block topped consensus in Q1 with adjusted EPS of $0.85 versus the $0.68 estimate, and in Q4 2025 it matched expectations at $0.65. The Q2 result marks the largest quarterly EPS beat since Q2 2024, when the company delivered $0.93 against a $0.83 forecast. Revenue for the trailing twelve months stands at $25.04 billion, with a market capitalization of roughly $49.8 billion.
Management framed the AI-driven cost cuts as a permanent shift rather than a one-time margin lift. The workforce reduction was driven by AI tools that make software engineers more productive, with code changes per engineer up 150% since the start of the year. Those savings can be reinvested in new products to drive long-term revenue growth, an opportunity management says may not be reflected in the stock price.
The stock remains down more than 75% from its 2021 peak, reflecting slower growth and intensifying competition in fintech. The earnings jump tied to AI productivity could represent a structural shift in costs, with management expecting the leaner cost structure to drive sustained operating efficiencies. Investors will watch the Q3 earnings report on Nov. 5 for evidence that Cash App growth stabilizes while margins continue to expand.
This article is for informational purposes only and does not constitute investment advice.
