Block Inc (NYSE: SQ) delivered a mixed first-quarter earnings report that nonetheless sent shares sharply higher in after-hours trading, as the company raised its 2026 gross profit outlook on the back of robust performance from its Cash App and Square segments. The stock gained 7.7% in extended trading, reflecting investor optimism around Jack Dorsey's AI-driven restructuring strategy.
The company now projects 2026 gross profit of $12.33 billion, up from its previous estimate of $12.20 billion, representing a 19% year-over-year increase. The revised guidance comes after a first quarter in which gross profit surged 27% to $2.91 billion, well ahead of analyst expectations. Adjusted diluted earnings per share came in at $0.85, significantly above the consensus estimate of $0.68 compiled by LSEG.
Cash App Drives Growth
Cash App was the standout performer, generating gross profit of $1.91 billion—a 38% jump from the prior year. Consumer lending originations soared 82% to $17.6 billion, fueled primarily by the Cash App Borrow product. The number of primary banking actives reached 9.7 million, up 18% year over year. Jeff Cantwell of Seaport Research highlighted Cash App as the clear winner of the quarter, noting that Block's execution appeared unaffected by the company's workforce reductions.
Square Segment Shows Acceleration
Square, Block's merchant payments arm, posted a 9% increase in gross profit to $982 million, with gross payment volume (GPV) climbing 13%. Chief Financial Officer Amrita Ahuja pointed to an acceleration in Square's GPV growth during the first quarter and said the company expects Square's gross profit to track close to GPV growth in the second half of the year.
Restructuring and AI Focus
The earnings report offered investors their first detailed look at the impact of Dorsey's aggressive cost-cutting and AI-focused reorganization. Block slashed its workforce by over 40% as part of a February restructuring plan, generating annualized net cost savings of between $800 million and $900 million. However, the company plans to reinvest a portion of those savings back into the business. In a shareholder letter, Dorsey noted that artificial intelligence is already helping Block move faster and improve quality internally, with Moneybot now operational across Cash App and Managerbot deployed to over 1 million sellers.
Quarterly Loss and DOJ Provision
The quarter was marred by significant charges. Block reported a net loss of $308.7 million, compared to a $189.9 million profit in the same period last year. Restructuring charges alone amounted to $495.3 million, while transaction, loan, and consumer receivable losses added another $500.1 million. A bitcoin remeasurement loss of $172.8 million also weighed on results. Additionally, the company set aside $240 million related to an ongoing Justice Department inquiry, cautioning that the ultimate settlement figure could exceed that amount and have a material impact.
Outlook and Challenges
For the second quarter, Block projects gross profit of $3.04 billion, with adjusted operating income of $740 million and adjusted diluted EPS of $0.86. The company now faces the challenge of sustaining growth in Cash App's lending business and Square's processing volume while managing rising credit losses, regulatory expenses, and the volatility of its bitcoin operations. With consumer spending remaining resilient—supported by wage gains and larger tax refunds—Block appears well-positioned to navigate these headwinds, though the path forward will require careful execution of its AI and cost-saving initiatives.
