Block’s AI bet joins a stronger Cash App and Square growth story

Block raises 2026 targets after a sharp profit acceleration

Block, Inc. (NYSE:XYZ) has raised its full-year targets after third-quarter gross profit climbed 22% year on year to US$3.24 billion, while adjusted operating income rose 92% to US$923 million. The company reported GAAP operating income of US$428 million, up from US$409 million a year earlier, and GAAP diluted earnings per share of US$0.92. Its non-GAAP adjusted diluted EPS reached US$1.13, up 109%.

The improvement was not confined to one side of the business. Cash App gross profit increased 27% to US$2.07 billion, while Square gross profit rose 14% to US$1.16 billion. Square gross payment volume grew 14% to US$76.4 billion, its strongest growth rate since the first quarter of 2023, according to the shareholder letter.

Cash App scales while lending carries more of the growth load

Cash App reached 60 million monthly transacting actives in September, with Block identifying its Neighborhoods loyalty and discovery product as a key contributor to growth. Commerce enablement volume rose 14% year on year to US$56.9 billion, while its monetisation rate expanded to 1.74% from 1.56%.

Consumer lending origination volume grew 40% to US$19.0 billion, led by Cash App Borrow and Afterpay Post-Purchase. Block completed the migration of Cash App Borrow to a six-week loan structure during the quarter and said it expects to begin expanding borrowing limits again in the near term. That growth comes with a balance-sheet commitment: the company deployed US$1.4 billion of capital to grow lending products over the trailing 12 months.

Higher losses and legal charges complicate the headline margin gain

The headline adjusted margin expanded to 29% of gross profit, but the reconciliation deserves attention. Block recorded US$435 million of contingencies, restructuring and other charges in the quarter, compared with US$21 million a year earlier, while transaction, loan and consumer receivable losses increased 66% on a GAAP basis to US$602 million. The company said Cash App consumer lending’s variable profit margin remained in line with the prior-year quarter and that Borrow risk loss rates remained healthy, but the scale of lending growth makes credit performance an important counterweight to the profit story.

Block ended September with US$10.1 billion of total liquidity, including US$9.2 billion in cash, cash equivalents, restricted cash and marketable debt securities, plus US$900 million available under its revolving credit facility. The company also reported US$809 million available under warehouse funding facilities. Those resources support continued lending expansion, but do not remove the exposure to losses, funding conditions or the legal contingencies reflected in GAAP expenses.

AI products move from internal tools towards commercial tests

Beyond payments, Block is trying to turn its internal AI infrastructure into a new business. It began piloting Buzz with prospective customers in October and expects to generate its first machine-intelligence revenue in the fourth quarter through the newly created Builderlab ecosystem. Squaremates, the rebranded AI product for Square sellers, is generally available in the United States, while the new Square Kiosk combines voice-enabled AI with self-service ordering.

Management’s preliminary 2027 outlook calls for gross profit of US$14.519 billion, up at least 15%, and adjusted operating income of US$4.575 billion, representing 30% growth and a 32% margin on gross profit. Block says that guidance does not rely on Neighborhoods or externally sold AI initiatives. That leaves those projects with something to prove: they are being presented as potential future growth engines, but their commercial contribution remains at an early stage.