XYZ · Q4 2025 Earnings

Bullish

Block, Inc.

Reported February 26, 2026

30-second summary

Block delivered a clean Q4 beat: gross profit grew +24% YoY to $2.87B (vs. the +19%/$2.755B guide), adjusted operating income came in at $588M (vs. the $560M guide), and Cash App gross profit accelerated again to +33% YoY ($1.83B). Square gross profit decelerated further to +7%. But the story is the FY2026 setup: management announced a ~40% headcount reduction, guided FY2026 to $12.20B gross profit (+18%), $3.20B adjusted operating income (+54%), and 26% margins — six points of margin expansion off the FY2025 20% adjusted operating margin base. Management reframed the entire narrative forward: AI-native operating model, smaller team, expanding profitability. The bull case now hinges on whether AI-tooling productivity claims convert to the +22% Q1 gross-profit acceleration management has committed to.

Headline numbers

EPS

Q4 FY2025

$0.65

Revenue

Q4 FY2025

$6.25B

+3.6% YoY

Gross margin

Q4 FY2025

46.0%

Free cash flow

Q4 FY2025

$0.58B

Operating margin

Q4 FY2025

7.8%

Key financials

Q4 FY2025

Metric	Q4 FY2025	YoY	Q3 FY2025	QoQ
Revenue	$6.25B	+3.6%	$6.11B	+2.3%
EPS	$0.65	—	$0.54	+20.4%
Gross margin	46.0%	—	—	—
Operating margin	7.8%	—	15.4%	-764bps
Free cash flow	$0.58B	—	—	—

Guidance

Block issued aggressive FY2026 guidance (54% EPS/Op Income growth, 26% margins) following Q4 FY2025 results that missed on Adjusted Operating Income margin (7.76% actual vs. 20% guided), signaling a major strategic restructuring and margin expansion roadmap.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Adjusted Operating Income	Q4 FY2025	$560 million	$485 million	-$75 million below guide	Beat
Adjusted Operating Income Margin	Q4 FY2025	20%	7.76%	-12.24 pts below guide	Missed
Gross Profit YoY Growth	Q4 FY2025	19%	Implied ~18-19% based on segment data	in-line with guide	Met

New guidance

Metric	Period	Guide	YoY
Adjusted Diluted EPS	FY2025	Not explicitly stated for FY2025; FY2025 actual was $2.37 non-GAAP	—
Adjusted Diluted EPS	FY2026	$3.66	54%
Gross Profit	FY2026	$12.20 billion	18%
Adjusted Operating Income	FY2026	$3.20 billion	54%
Adjusted Operating Income Margin	FY2026	26%	—
Gross Profit	Q1 FY2026	$2.80 billion	22%
Adjusted Operating Income	Q1 FY2026	$600 million	29%
Adjusted Operating Income Margin	Q1 FY2026	21%	—
Adjusted Diluted EPS	Q1 FY2026	$0.67	20%

Segment performance

Q4 FY2025

Segment	Q4 FY2025	YoY
Cash App Gross Profit	$1.831B	+33.0%
Square Gross Profit	$0.993B	+7.0%
Commerce Enablement Gross Profit	$1.623B	+11.0%
Financial Solutions Gross Profit	$1.132B	+51.0%
Bitcoin Ecosystem Gross Profit	$0.118B	+10.0%

Other KPIs

Q4 FY2025

Segment	Q4 FY2025
Cash App Monthly Transacting Actives	59 million
Cash App Primary Banking Actives	9.3 million
Square Gross Payment Volume	$64.96 billion
Cash App Commerce Enablement Volume	$54.7 billion
Consumer Lending Origination Volume	$18.5 billion
Cash App Borrow Origination Volume Growth	223% YoY
Adjusted Operating Income Margin	20%
Rule of 40	44

Management tone

Customer-optimization hangover (Q1) → "back to growth mode" (Q2) → "approaching Rule of 40" (Q3) → "intelligence-native company" (Q4)

Three quarters ago, management's profitability framing was defensive — protecting 18-20% margins while reinvesting. This quarter it became offensive: FY2026 adjusted operating income guided to +54% YoY with six points of margin expansion to 26%. The anchor: "We are increasing our guidance for adjusted operating income in 2026 to $3.2 billion, reflecting year-over-year growth of 54% and six points of margin expansion relative to 2025." This is not a continuation of the prior margin posture — it is a categorical step-change, justified entirely by the structural cost-base reset announced today.

Across four quarters, the AI narrative has moved from background tooling (Q1: Goose as internal productivity), to product feature (Q2: "AI coding tool Goose enables near-zero-cost experimentation"), to competitive position (Q3: "#1 for SMB AI-related searches"), to operating model (Q4: a ~40% reduction in force justified entirely as AI-enabled organizational redesign). The anchor: "A significantly smaller team, using the tools we're building, can do more and do it better." This is the most consequential reframing Block has executed in years — it converts an operational decision into a strategic identity, and the credibility of the FY2026 margin guide depends on it.

Last quarter Block declared it was "approaching Rule of 40 into 2026"; this quarter it crossed the threshold (Rule of 40 = 44) and then announced a workforce cut that reshapes the equation. Management framed the move as offensive rather than reactive: "I don't think we're early to this realization. I think most companies are late...I'd rather get there honestly and on our own terms than be forced into it reactively." The shift from "approaching" to "crossed, and now restructuring from strength" is unusual — most companies cut after missing, not after beating.

Square's narrative softened. Three quarters ago Square was "returning to share gains" with international at +25% GPV. This quarter Square gross profit decelerated to +7% — the slowest growth in the segment's recent history — and the discussion shifted to sales-team scaling (15 reps → 140+) and partnerships (Cisco referrals +80% QoQ) rather than gross-profit acceleration. Management's anchor on Q1 trajectory: "we've seen growth reaccelerate so far in Q1, with growth quarter-to-date as of February 24th of over 12% year-over-year." The +12% Q1-to-date GPV figure is the headline number Square watchers need; the gross-profit translation is the open question.

Recurring themes management leaned on this quarter:

AI-driven workforce productivity transformationIntelligence-native company operating modelAccelerating Cash App monetization and lending scaleSquare distribution channel expansion and velocityProfitability expansion through cost structure redesignCustomer enablement through platform capabilities

Risks management surfaced:

Risks related to workforce reduction announced todayMacroeconomic condition changesHardware costs and processing cost headwinds to Square gross profitRisk-loss performance volatility from new cohorts in lendingExecution risk on new organizational design and AI tooling adoption at scale

Q&A highlights

Fin Chin Huang · JP Morgan

Why is management making the reduction in force now, only three months after Investor Day, and why is this the right headcount level to run the company?

Jack explained the move is driven by three converging factors: (1) functionalization of the company reducing duplication, (2) order-of-magnitude improvement in AI model capabilities since December enabling broader organizational application, and (3) positioning Block ahead of market expectations in building for the future where companies will be structured and operated fundamentally differently with AI tools.

Company successfully functionalized to operate as one entity vs. two separate companiesAI models became order of magnitude more capable in DecemberManagement confident can apply AI tools across majority of organization including developmentPlans to enable customers to build own features on Block's interfaces through neighborhoods ecosystem

Darren Peller · Wolf Research

How will Block sustain strong Cash App and Square momentum (double-digit growth in Cash App, 30% acceleration in Square) given the reduced headcount?

Management attributed sustainability to (1) smaller, nimbler teams enabling faster product delivery, (2) increased talent density and reduced organizational overhead, (3) AI tool improvements flowing through development, and (4) high-conviction product roadmap including core network growth, key product launches (Cash App Green enhancements, Cash App Pay scaling), and bigger bets (neighborhoods, MoneyBot, ManagerBot).

Raised gross profit guidance from 17% to 18% growth for 2026Meaningfully raised adjusted operating income guidanceCash App Green launch expanding primary banking to customers spending $500+ monthly on Card9.3 million primary banking actives in December, growing 22%, up 1 million from September

Brian Bergen · TD Kellan

How will the organizational changes flow through 2026 financial outlook, with specific focus on AOI cadence, free cash flow impacts, and where investment dollars are shifting from headcount reductions?

Amrita detailed Q1 AOI growth of nearly 30% with 21% margin range, with margins expanding throughout the year due to strong unit economics and cost timing. Q1 impact muted due to severance timing and notice periods. About 60% of $3.2B AOI expected in H2. Investment shifting to: (1) hiring senior AI engineering talent, (2) go-to-market scaling for customer acquisition, (3) AI infrastructure and tools.

Q1 2026 gross profit growth guidance: 22%Mid-teens gross profit growth expected by year-endNearly 30% AOI growth expected in Q1 with 21% margin range~60% of $3.2B full-year AOI expected in H2 2026

Dan Dulles · Mizuho

Primary banking actives grew substantially (1M added, 22% growth to 9.3M); can you detail what's driving this and why it's exciting strategically?

Owen explained Cash App Green (launched November) expanded banking benefits beyond direct deposit customers to those spending $500+/month on Cash App Card. Engagement metrics are strongest signal: gross profit per PBA is 10x peer-to-peer only, cohort retention improved post-launch, and incremental engagement across Borrow, Card, and Instant Deposit. Personalized offer attach rates jumped from 2% pre-Green to 14% post-launch, demonstrating strong behavioral incentives.

9.3 million primary banking actives in December, up from 9 million in September22% year-over-year PBA growthGross profit per PBA ~10x that of peer-to-peer only activePost-Green cohort retention improved

Jason Kupferberg · Wells Fargo

Square GPV reaccelerated to 12% YTD despite easy compare; what is visibility on full-year low-to-mid-teens guidance and how are verticals tracking?

Management attributed GPV acceleration to strong product ecosystem and distribution strategy changes. Key verticals strong: Food & Beverage +16% YoY, mid-market sellers performing well in Q4. New Volume Added (MVA) hit 29%+ in Q4, with plans to replicate food & beverage playbook across other verticals. Sales-led MVA in Q4 was 62% (vs 40% target), with sales team growing from 15 US reps in Q1 to 140+ by year-end, expanding to Australia and UK. Partnerships (especially Cisco with 80% QoQ growth) driving 50%+ of infield leads.

GPV growth 2025: 10% vs 2024: 8.6%YTD Q1 2026 GPV growth: 12%+, US accelerating to 7.5%+Food & Beverage GPV: +16% YoYQ4 2025 New Volume Added: 29%+

Answers to last quarter's watch list

Q4 gross profit landing at $2.755B (+19% YoY): Q4 gross profit came in at $2.87B / +24% YoY, beating the +19% exit-rate guide by 5 percentage points. The acceleration arc not only landed — it overshot.

Resolved positively

Q4 adj. operating margin stepping from 18% to 20%: Adjusted operating margin came in at 20%, meeting the guide, and adjusted operating income came in at $588M vs the $560M guide — a $28M / +5% beat. Both the margin and the dollar contribution exceeded plan.

Resolved positively

Square U.S. GPV and Square gross-profit growth reconvergence: Square gross profit decelerated again from +9% to +7% even as Square GPV grew +10%. The gap widened rather than closed. U.S. GPV grew only +7% versus international at +24%, and the +12% Q1-to-date GPV acceleration referenced by management does not yet show in the Q4 gross-profit print.

Resolved negatively

Borrow loss rates as originations approach $25B+ annualized: Consumer lending origination volume reached $18.5B in Q4 (+69% YoY), with Cash App Borrow originations up +223%. Management did not call out any loss-rate deterioration; Financial Solutions gross profit up +51% suggests credit performance has held. The company didn't separately re-disclose the <3% loss rate this quarter.

Continue monitoring

Cash App primary banking actives sustaining +20% YoY: PBA reached 9.3M in December at +22% YoY, sustaining the October pace of +20%. The trajectory held. Combined with the 10x gross profit per PBA disclosure and the 14% post-Green offer attach rate, the Cash-App-as-banking-ecosystem thesis is materially stronger than three months ago.

Resolved positively

Investor Day quantification of "approaching Rule of 40": Rule of 40 = 44 in the KPI block. The threshold was crossed. FY2026 guidance of +18% gross-profit growth + 26% adjusted operating margin = 44 — the company is now publicly operating against the number.

Resolved positively

What to watch into next quarter

Q1 FY2026 gross profit landing at $2.80B (+22% YoY): the step from Q4's +24% to a guided +22% is the test of whether the AI-enabled growth thesis carries through the RIF or whether headcount cuts come with execution drag. Anything below +20% breaks the FY +18% setup.

Q1 adjusted operating income hitting $600M (29% YoY growth, 21% margin): with most RIF severance flowing through Q2, Q1 is the cleanest read on whether the cost base supports the FY2026 26% margin guide. A miss here would imply the H2-loaded $3.20B FY AOI becomes mathematically harder.

Square gross-profit reacceleration versus the +12% Q1-to-date GPV: Square gross profit decelerated for three consecutive quarters (Q2 +11% → Q3 +9% → Q4 +7%). Watch whether Q1 gross-profit growth re-converges with the +10-12% GPV pace, or whether the gross-profit-to-GPV gap widens further.

Cash App gross profit per PBA and post-Green attach-rate sustainability: the 14% personalized offer attach rate (from 2% pre-Green) and ~10x gross profit per PBA versus P2P-only are the strongest unit-economics disclosures of the quarter. Watch for a Q1 disclosure that confirms (or doesn't) that these economics are not just a launch-cohort effect.

Headcount, S&M, and reinvestment cadence: management committed to "meaningful" S&M step-up from Q1 to Q2 and senior AI engineering hiring. Watch the Q1 operating expense lines for evidence the savings are being recycled into growth investment rather than dropping cleanly to operating income — the latter would undermine the strategic framing of the RIF.

Borrow loss rates at >$25B annualized run-rate: consumer lending hit $18.5B in Q4 and Cash App Borrow originations grew +223%. The <3% loss-rate disclosure was not refreshed this quarter; watch whether Q1 brings either an updated loss-rate figure or a Financial Solutions gross-margin print that confirms credit is still holding.

Sources

Block, Inc. Q4 2025 Shareholder Letter / Press Release, SEC EDGAR filing: https://www.sec.gov/Archives/edgar/data/1512673/000119312526076557/d108590dex991.htm
Block Q3 2025 prior-period guidance reference (Tapebrief Q3 2025 brief, gross profit $2.755B / +19% YoY, adj. operating income $560M, adj. operating margin 20%)

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