Block's EPS beat at $1.02 didn't stop a 6% drop; Cash App actives grew just 3%. The test: can user growth stabilize while AI-driven margins expand?
Block Inc. (NYSE: XYZ) reported adjusted EPS of $1.02 for the second quarter on Aug. 5, beating the $0.87 consensus, and raised full-year guidance. The next day the stock fell about 6%.
The number investors fixed on was Cash App's monthly transacting actives. They grew 3% from a year earlier in June, a slowdown from the prior quarter.
Block cut its workforce by 40% in February, saying AI tools had made engineers more productive. The results show up in the margin line. Code changes per engineer are up 150% since the start of the year, management said. Management frames the efficiency as durable, not a one-time trim. Second-quarter gross profit rose 25% year over year, and adjusted operating income margin hit an all-time high of 27%.
Square's U.S. gross payment volume accelerated to its fastest pace since 2023. More than 200 active ISO (independent sales organization) partners helped drive over 150% quarterly growth in new sellers from that channel. Cash App gross profit rose 31%; consumer lending originations were up 59%, and commerce enablement volume rose 17%. New launches give users reasons to engage. Cash App Tags and Cash App Mobile are out, and Afterpay Pre-Purchase on Cash App Card reached general availability. Management plans to scale the Neighborhoods program, which connects Square sellers to Cash App customers, more aggressively in the second half.
Trouble is on the user side. Cash App's monthly transacting actives grew 3% in June from a year earlier, slower than the prior quarter. That guidance covers only low single-digit actives growth for all of 2026, a marked deceleration for the business line that has historically produced the fastest growth numbers.
A sale by the CFO added to the caution. Amrita Ahuja sold 8,971 shares on the same day as the earnings report, a transaction worth about $770,000 under a Rule 10b5-1 plan adopted in March. The sale trimmed her direct stake by about 2%, leaving 454,275 shares. Insider sales near earnings dates draw attention even when the plan was set months earlier.
Block's shares are down more than 75% from their 2021 peak. Hedge fund interest held steady; 63 funds held the stock in both the most recent quarter and the one before. Short interest is 3.11% of float.
The bull case rests on the durability of the AI-driven margin gains. Gross profit grows 25% and operating margin sits at a record; code changes per engineer are climbing as well. For that case to hold, Cash App user growth needs to stabilize. The bear case rests on the actives deceleration. If the slowdown reflects competition rather than a temporary lull, the network effects Block has built its strategy around come under pressure.
AlphaScala's proprietary data labels Block as Mixed, with an Alpha Score of 42 out of 100. The full profile is on the XYZ stock page.
As of Aug. 14, the shares traded at 21.37 times forward earnings.
Drafted by a large language model from the source reporting linked above, then screened by automated publishing checks. It is not read by a journalist before publication. Some articles cite our Alpha Score. Verify prices and figures against the original source. Educational coverage, not personalized advice.