Block's AI Reorg Pays Off in Product Speed, Raised Outlook

Block is shipping products three times faster than a year ago, and the company credits artificial intelligence for the acceleration. CEO Jack Dorsey said on Wednesday's earnings call that AI tools have given the company "a more cohesive context and memory" that lets it build and deliver software at a higher clip. The improvement comes after Block cut 40% of its staff, a move Dorsey tied directly to AI's potential to replace human labor.

"We're well along on the path to implementing these tools faster," Dorsey said.

The progress showed up in the numbers. Block reported second-quarter revenue of $6.6 billion, up from $6.1 billion a year ago, beating the Zacks consensus estimate of $6.54 billion. Adjusted diluted EPS came in at 86 cents, in line with analyst expectations. Net income was $87 million, or 15 cents per share, down sharply from $538 million, or 88 cents per share, a year earlier – the decline largely reflecting restructuring costs tied to the headcount reduction.

Block raised its full-year outlook. The company now expects gross profit growth of 21%, up from an earlier forecast of 19%, and adjusted diluted EPS of $4.02, up from $3.85. In a letter to shareholders, Block attributed much of the improved outlook to AI-driven workflow changes and product development.

"Intelligence tools are the next major technology shift, but machine learning is not new to Block," Dorsey wrote.

Gross profit by segment

Square, Block's merchant-facing unit, posted gross profit of $1.16 billion, up 13% from a year ago. Cash App, the consumer peer-to-peer service, delivered $1.97 billion in gross profit, up 31%. Cash App's growth was driven in part by an aggressive expansion of its lending business. The Cash App Borrow product originated more than $27 billion in loans over the five quarters since March 2025, compared with $9 billion in all of calendar 2024. The FDIC in March approved Square Financial Services to originate and service loans through Cash App, opening the door to broader credit offerings.

Cash App's user base skews younger and includes gig-economy workers, a demographic that traditional banks have struggled to serve profitably. Block is among a wave of fintechs adding credit products to compete with banks. The company also expanded its buy now/pay later offering by deepening ties between Cash App and Afterpay, the BNPL service Block acquired in 2022.

BofA Global Research analysts said Cash App's growth trajectory will hinge on whether Block can scale Cash App Borrow while keeping loss rates contained. "We believe investors remain willing to reward strong execution, particularly if management demonstrates that recent efficiency gains are sustainable," the BofA analysts wrote in a note.

The cost of AI

The AI-driven reorganization comes with its own expense line. CFO and COO Amrita Ahuja said on the call that AI budgets are rising. "Our budgets are going up. But we don't think the right answer is to contract use of these tools," she said.

To manage costs, Ahuja said Block uses a "model agnostic" strategy that avoids locking into a single large language model provider. She argued that open-source AI models often develop faster, and that flexibility helps the company allocate computing resources efficiently. "We see the headlines about AI expenses," Ahuja said. "We think we're well-positioned."

RBC Capital Markets, in a research note, said the costs of Block's downsizing were largely contained to the first quarter, meaning expenses should start declining from here.

Buzz and agentic AI

Block in July launched Buzz, an internally built system for AI agent collaboration, communication and code repositories. Dorsey said the platform will be used both internally and for external clients. "There's a lot of avenues to monetize Buzz," he said, adding that the system can tailor development to specific merchant needs. "Sellers also want help with AI, and we can make it simpler to use and give sellers time back rather than having a burden of learning."

By June, agentic AI was writing or reviewing nearly all production code changes at Block, the company said on the call. Its Moneybot digital assistant is now available to all Cash App users.

Block faces competitive pressure from PayPal, Stripe, card networks and traditional banks. Dorsey's pitch is that AI gives the company a structural cost and speed advantage that rivals will struggle to match. The stock has not yet priced in the full benefit, according to some analysts, but the raised guidance and product-ship metrics give them a benchmark to track.

Block (ticker: SQ) reports its next quarterly results in November. The company's RBC stock page shows an Alpha Score of 43 out of 100, rated Mixed, reflecting the tension between strong execution metrics and the uncertainty around AI cost trajectories and competitive dynamics in payments.