Block Inc. beats Q1 earnings as artificial intelligence restructuring accelerates growth

Block raises 2026 outlook after first-quarter earnings beat, accelerating gross profit growth - SiliconANGLE

Block raises 2026 outlook after first-quarter earnings beat, accelerating gross profit growth Shares of Block Inc. rose more than 8% in late trading today after the financial services company beat earnings expectations, accelerated gross profit growth and raised its full-year outlook on the back of a deepening artificial intelligence push inside the business. For its fiscal 2026 first quarter that ended on March 31, Block reported adjusted earnings per share of 85 cents, up from 56 cents per share in the same quarter of the previous year, on revenue of $6.06 billion, up 4.9% year-over-year. Earnings came in ahead of the 68 cents per share expected by analysts, but revenue fell short of an expected $6.12 billion. Gross profit climbed 27% year-over-year to $2.91 billion and outpaced the company's own guidance. Adjusted operating income grew 56% to a record $728 million, lifting adjusted operating margin to an all-time high of 25%. Cash App gross profit rose 38% year-over-year to $1.91 billion, while Square gross profit grew 9% to $982 million. Square gross payment volume grew 13% year-over-year, with U.S. volume up 8.2% and international volume up 35%. Cash App Commerce Enablement volume growth was up 18% year-over-year and consumer lending origination volume jumped 82%, driven by a near-tripling of Cash App Borrow originations. Block's bitcoin ecosystem segment was the soft spot in the report, with revenue falling to $1.80 billion from $2.33 billion a year earlier and gross profit declining 26%. Block attributed the drop to bitcoin trading dynamics and a strategic decision to lower fees on certain bitcoin transactions in Cash App. Block raised guidance across the board for 2026. The company now expects a full-year gross profit of $12.33 billion and growth of more than 19% year-over-year, up from a prior forecast of $12.2 billion. It also expects adjusted operating income of $3.34 billion at a 27% margin, growth of 60% year-over-year and adjusted diluted earnings per share of $3.85. For the second quarter, Block guided gross profit growth of 20% to $3.04 billion and adjusted operating income of $740 million. Chief Executive Officer Jack Dorsey used Block's shareholder letter to push the artificial intelligence-native restructuring story he outlined in February, when Block laid off roughly 40% of its workforce. As of mid-April, production code changes per engineer were running at more than 2.5 times the January rate and incident rates after a production code change fell more than 70% year-over-year. All Block employees are now using AI tools in their work. The company highlighted Builderbot, an internal agent that has reviewed more than 90% of production code change requests in early April and is making 15% of production code changes nearly autonomously. On the customer side, Block is rolling out what it calls "protectors," including Moneybot for Cash App and Managerbot for Square sellers. Managerbot is available to more than 1 million sellers, with general availability in the U.S. expected in June. "In my last letter, I shared that AI tools have changed what it means to build and run a company," Dorsey said in the shareholder letter. "A significantly smaller team, using the tools we are building, can do more and do it better. We were early and deliberate in this strategy." The result extends a turnaround for Block after a rough 2025 in which the company missed revenue estimates and cut guidance in the first quarter, then disappointed again in the third quarter.

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CEO Jack Dorsey told analysts the company's internal reorganization was intended to flatten processes as Block leans more heavily into AI tools across engineering, underwriting and commerce workflows. "One of the strongest outcomes of the action we took is just the speed of decision-making and the ability to act on that decision through the tools," Dorsey said during the Q&A portion of the call. "Now that these AI tools are handling more of the mundane task and we're automating a lot more, we can focus on being a lot more creative and being a lot more innovative again." The comments came as Block reported accelerating growth across both Cash App and Square while raising its full-year outlook. Gross profit rose 27% year over year to $2.91 billion, while adjusted operating income climbed 56% to $728 million. Cash App gross profit increased 38% and Square gross profit rose 9%. The call detailed how Block is trying to reposition Cash App from a peer-to-peer payments platform into a broader financial and commerce ecosystem centered on lending, installments, local merchant discovery and AI-driven engagement. During the quarter, Block expanded buy now, pay later (BNPL) capabilities across Cash App, including Afterpay Pre, which lets eligible users split purchases into installments using the Cash App Card. The company also extended BNPL functionality into peer-to-peer transactions and Cash App Pay. Consumer lending origination volume increased 82% year over year to $17.6 billion during the quarter, driven largely by Cash App Borrow and BNPL activity. Commerce enablement volume climbed 18% to $55 billion. CFO Amrita Ahuja said engagement across multiple products -- rather than simple user growth -- is driving the economics of the platform. Cash App monthly transacting actives reached 59 million in March, while primary banking actives climbed 18% year over year to 9.7 million. Inflows per active customer increased to $1,494 during the quarter. Management also highlighted Cash App Score, a newly introduced underwriting and financial management feature that surfaces recommendations intended to help customers improve their borrowing profiles. The company said early testing showed 80% of users took at least one recommended action after receiving guidance from the system. The AI strategy extends to sellers as well. Managerbot, Block's AI tool for merchants, has now been deployed to more than 1 million sellers and is expected to reach all Square sellers in June. The company is also trying to deepen ties between merchants and consumers through Neighborhoods, a local loyalty and discovery initiative embedded inside Cash App. Sellers representing $320 million in annualized GPV are now participating in the program, up 190% since December. Block also said more than 100,000 Cash App accounts now follow at least one Neighborhoods seller. On the seller side, Square GPV increased 13% year over year to $61.2 billion, with international GPV growth reaching 35%. Growth among food-and-beverage sellers accelerated to 21%, while mid-market seller growth hit 22%, the strongest pace the company has seen since early 2023. Block also pointed to growing traction among field sales teams and ISO partnerships, with more than 140 active ISO partners now contributing merchant volume growth. Looking ahead, Ahuja said Block expects continued momentum from embedded lending products and seller expansion initiatives even as lending growth begins to normalize from exceptionally strong comparisons. "We're really just getting started on that," Ahuja said, referring to consumer lending infrastructure being integrated across the Cash App ecosystem, "and seeing growth continue and momentum continue into the back half."