Key Takeaways
- Block jumped 15.3% on Wednesday to a new 52-week high after third-quarter gross profit grew 22% to $3.24 billion, then closed Thursday at $84.
- Adjusted operating income rose 92% to $923 million at a record 29% margin, and Block raised its 2026 adjusted EPS outlook to $4.15.
- Block stretched Cash App Borrow into longer loans, and CFO Amrita Ahuja said customers “are going to borrow less frequently” as a result.
- Block trades at 16.1x forward earnings versus PayPal at under 10x, and its 2027 target of at least 15% gross profit growth sets the next bar.
Block (XYZ) walked into its third-quarter report with a downgrade hanging over it. It walked out with a record quarter.
Shares jumped 15.3% on Wednesday to $88, a new 52-week high, after gross profit grew 22% to $3.24 billion. Management had guided to 18%. The stock gave back 4.1% on Thursday as the Nasdaq fell 5.5%, closing at $84, still 11% above its pre-report level.
Adjusted EPS of $1.13 more than doubled and beat the roughly $1.03 consensus.
PayPal (PYPL) rose 3.4% on Wednesday too, then slipped 2.1% on Thursday to $59. Still, the two stocks are priced for different futures. Block trades at 16.1x forward earnings, while PayPal sits at 9.8x after growing third-quarter revenue just 2%.
The beat also answers part of Morgan Stanley’s downgrade. The firm had warned that a shift to longer Cash App Borrow loans could slow originations and lift credit losses.
Beating its own guide
The headline numbers:
- Gross profit of $3.24 billion, up 22%, versus a $3.13 billion guide
- Adjusted operating income of $923 million, up 92%, at a record 29% margin
- Cash App gross profit of $2.07 billion, up 27%, with monthly transacting actives up 4% to 60 million
Square gross profit grew 14%, in line with payment volume.
Guidance moved up across the board. Block now expects 2026 gross profit of $12.626 billion, up 22%, adjusted operating income of $3.519 billion and adjusted EPS of $4.15, up from $4.02.
Growth cooled from the second quarter’s 25%, but far less than feared:
Gross profit landed about $110 million above guidance. And operating income beat its own target by $48 million.
Borrow got slower and pricier
Block stretched Borrow from four-week loans with a 5% fee to six-week loans with a 7.5% fee. Ahuja was blunt about the trade-off on the call. With the same credit limits and longer terms, customers “are going to borrow less frequently.”
The economics improved anyway. Block raised its target variable profit margin on Borrow to 2.8% from 2%, and Cash App financial solutions gross profit grew 36%. Commerce enablement, led by buy now, pay later on Cash App Card, grew 27%.
What the quarter doesn’t settle is credit. Losses nearly doubled to $585 million in the second quarter, and longer loans take longer to reveal their true loss rate.
Meanwhile, the profit line keeps compounding…
The new $4.15 guide implies 75% EPS growth this year.
TIKR tracks 47 analysts on Block. How many say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Block, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Block’s Analyst Ratings
The premium just got wider
Block trades at 16.1x forward earnings and 8.6x forward EBITDA. PayPal sits at 9.8x and 7.6x.
Over three years, the spread looks like this:
This week’s move widened a gap that already reflected Block’s faster growth.
The outlook supports some of it. Block expects fourth-quarter gross profit growth above 15% with a 30% adjusted operating margin. For 2027, it sees at least 15% gross profit growth and a 32% margin.
Even after Thursday’s dip, the $98 average analyst target implies only about 17% upside.
My take: The quarter earns the rally. Block beat its own guide, widened margins and showed Borrow can earn more per loan even as volume slows. Still, at 16.1x with the stock up 11% since the report, much of the downgrade fade is already priced. I’d hold and add on dips.
The next check is the third-quarter 10-Q, which will show whether loss growth slowed from the second quarter’s near-doubling. After that, the February 25 report needs to confirm the 2027 outlook.
So what is Block stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
