Block's third-quarter gross profit increased to $3.24 billion, but it still needs to pay $960 million in settlement fees.
Written by: Nicky, Foresight News
According to Block's third-quarter financial report released on November 4, the company's gross profit increased by 22% year-on-year to $3.24 billion, exceeding analysts' average expectation of $3.1 billion. The company raised its full-year gross profit forecast for 2026 from approximately $12.5 billion to approximately $12.6 billion, marking the third consecutive upward adjustment of guidance.
After the financial report's release, according to Bitget market data, Block's stock price surged more than 9% in after-hours trading, reaching $83.45. On the first trading day after the report, the stock opened up 15.3% and closed at $87.63, with a market capitalization of approximately $52.974 billion.
The analyst consensus is "moderate buy," with an average target price of approximately $95 to $98. The Bank of Montreal (established in 1817, the oldest bank in Canada) upgraded its rating to "outperform" with a target price of $100; Morgan Stanley previously downgraded its rating to neutral due to concerns over lending credit risks, with a target price of $80.
Two Ecosystems: Cash App and Square Accelerate in Sync
From a business structure perspective, Block's growth is driven by the consumer-facing Cash App and the merchant-facing Square.
Cash App's gross profit for the third quarter was $2.07 billion, a year-on-year increase of 27%. According to the company, the number of active monthly users reached 60 million in September, a year-on-year increase of 4%, reversing the stagnation of previous quarters.
The key feature driving growth is Neighborhoods (embedded within Cash App, connecting Square merchants with Cash App users in local merchant discovery + cashback transaction networks), which connects Cash App users with Square sellers. Currently, more than 30,000 Square sellers have automatically joined, with the annualized total payment volume of participating sellers approximately $5 billion, growing about five times since June.
Consumer lending disbursements reached $19 billion, a year-on-year increase of 40%, with Afterpay’s buy now, pay later disbursements increasing more than three times year-on-year. On the product side, Cash App launched a Spanish version, enhanced family account features, a pilot for Earn in P2P, and Cash App Tags hardware products this season, with one-fifth of the orders coming from new or reactivated users.
Square's gross profit for the third quarter was $1.16 billion, a year-on-year increase of 14%. The total payment volume was $76.4 billion, a year-on-year increase of 14%, the fastest growth since the first quarter of 2023. In the U.S., growth was 10.4%, while international growth was 26%. The number of new sellers onboarding through self-service reached the highest level in over a decade, with new sellers from ISO (Independent Sales Organization) partners increasing 90% quarter-on-quarter. On the product side, Square launched a voice AI self-ordering device, Square Kiosk, and the AI tool Squaremates has been fully launched in the U.S., releasing over 180 new features in the first three quarters.
Bitcoin business gross profit halved, AI revenue set to materialize.
Revenue from Bitcoin-related businesses in the third quarter was $1.8 billion, but gross profit was only $52 million, a year-on-year decrease of 50%. Block explained that the main reason was a strategic reduction in certain Bitcoin transaction fees on Cash App, positioning Bitcoin as a customer acquisition and expansion tool rather than a profit center.
On November 4, according to Bitcoin Treasuries, Block acquired 120 BTC in the third quarter, bringing its total holdings to 9,237, ranking 14th on its Bitcoin 100 list.
Regarding AI, Block's business head Owen Jennings stated on the earnings call that the company expects to earn revenue directly from AI tools for the first time in the fourth quarter and anticipates that AI investments will drive subsequent growth. AI tools have been fully deployed internally, including model routing, autonomous code review, and collaboration tool Buzz. The Builderlab aimed at external customers began piloting in October, with expectations to generate machine intelligence revenue in the fourth quarter.
Also disclosed alongside the financial report was a regulatory development.
Block stated that it has reached a principle agreement with the U.S. Department of Justice regarding a multi-year anti-money laundering investigation. The agreement is intended to be resolved through a deferred prosecution agreement, whereby the Justice Department will defer related criminal charges for three years, and if the company fulfills its obligations for rectification and supervision cooperation, the charges may be permanently dismissed.
The total amount of the agreement is approximately $964 million, and after deducting credits for previously paid regulatory settlements, the net payment is approximately $764 million. As of September 30, Block had accrued $764 million for this, having previously accrued $240 million and $526 million at the end of March and June, respectively. The agreement still requires a final text and court approval, and the company warned that final terms may lead to losses exceeding the accrued amounts.
The investigation stemmed from a report by short-selling firm Hindenburg Research in March 2023, which alleged that Cash App had inflated user numbers and weakened anti-money laundering and KYC controls. The SEC concluded its investigation in March 2026 without recommending enforcement, while the DOJ continues to advance. Previously, Block reached a fine of about $40 million with the New York State Department of Financial Services and a total of about $80 million in related settlements with multiple states.
The other side of profitability: layoffs and lending losses.
Adjusted operating profit was $923 million, a year-on-year increase of 92%, with a profit margin of 29%, setting a record. Adjusted diluted earnings per share were $1.13, a year-on-year increase of 109%. The significant expansion of profit margins was partly due to the layoffs of over 40% announced at the beginning of 2026. According to the company, this plan has been largely completed, with an expected annualized net savings of $800 to $900 million, part of which will be reinvested into AI and growth.
Additionally, the expansion of lending has also brought new costs. In the third quarter, losses from transactions, loans, and consumer receivables amounted to about $602 million, directly related to the growth in the scale of lending. This is one of the risk points that institutions like Morgan Stanley are concerned about. Furthermore, Primary Banking Actives fell by about 13% year-on-year to 9.4 million, possibly related to tightened compliance and user vetting.
Annual Guidance and 2027 Outlook
Block has raised its full-year gross profit guidance for 2026 to $12.626 billion, a year-on-year increase of 22%; adjusted operating profit guidance is $3.519 billion, with a profit margin of 28%, a year-on-year increase of 69%; adjusted diluted earnings per share guidance is $4.15, a year-on-year increase of 75%.
The fourth quarter guidance for gross profit is $3.315 billion, a year-on-year increase of 15%; adjusted operating profit is approximately $1.005 billion, with a profit margin of 30%; adjusted earnings per share is $1.15.
The company also provided preliminary outlook for 2027: gross profit is expected to grow at least 15% to approximately $14.5 billion, adjusted operating profit is expected to be $4.575 billion, a year-on-year increase of 30%, with a profit margin of approximately 32%. Block anticipates that the Rule of 40 metric for 2026 will reach 50%.
In the shareholder letter, Jack Dorsey described the company's current phase as a shift from traditional financial products to "on-demand streaming intelligence," emphasizing four principles: customers want peace of mind rather than more products; the company's speed is determined by the flow of information; the best way to integrate machine intelligence is to become it; intelligence relies on signals, and money is the most honest signal. At the same time, he positioned Bitcoin and stablecoins as empowering tools for Cash App's expansion rather than merely sources of trading profit.
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
