Key Takeaways
- Block shares jumped 14% on a strong third quarter and higher 2026 guidance.
- Its first 2027 outlook calls for at least 15% gross profit growth and a 32% adjusted operating margin.
- Block is outgrowing PayPal, and Square is keeping pace with Toast in restaurants.
- Even after the jump, Block trades below its three-year average multiple.
Block (XYZ) shares jumped 14% today after it beat its own third-quarter guidance and raised its 2026 outlook.
Jack Dorsey wrote to shareholders: “We believe we’ve meaningfully crossed the chasm of transforming our company from one that creates traditional financial products into one that streams intelligence as people need it.”
And Block is pulling further ahead of PayPal (PYPL), while Square chases the same restaurants as Toast (TOST).
What exactly happened
Block’s profits grew far faster than its gross profit:
- Gross profit rose 22% to $3.24 billion.
- Adjusted operating income jumped 92% to $923 million, a record 29% of gross profit.
- Adjusted EPS rose 109% to $1.13, against a $1.03 consensus.
Block raised its 2026 adjusted EPS guide to $4.15, from $4.02.
The bigger news is 2027: gross profit up at least 15% to $14.52 billion, and adjusted operating income up 30% to $4.58 billion. That’s a 32% margin, above the 28% Block pledged after its AI restructuring.
So much for last week’s downgrade.
Analysts expected Block’s earnings to keep climbing through 2028:
The new $4.15 guide already tops the $4.05 consensus. With adjusted operating income set to grow 30% next year, I’d expect analysts to raise 2027’s $5.21 too.
And Block traded at 17x forward earnings at Tuesday’s close, a fraction of its 2021 peak of 153x:
Even after today’s jump, it’s below the roughly 20x it averaged over the past three years.
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
PayPal lags, and Toast keeps pace
PayPal’s payment volume grew 6% last quarter, against Square’s 14%. At 10x forward earnings, it’s priced as the slower grower. We’ll see in its early-February report whether Venmo can keep up with Cash App.
Toast grew payment volume 20%, matching Square’s food and beverage sellers. With more than half of Square’s US market still on legacy systems, by Block’s estimate, both can keep winning for now. The question for Toast is how long that lasts as Square goes after bigger chains.
Next up: Builderlab
On Nov. 10, Block introduces Builderlab, to sell its in-house AI tools to other companies.
The main risk is Cash App’s lending: consumer lending originations grew 40% in the third quarter, down from 59% in the second.
With higher targets and a below-average multiple, I think Block has more room to run. Of course, we’ll only know whether it has really “crossed the chasm” once Builderlab brings in outside revenue.
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 of the stocks mentioned. Thank you for reading, and happy investing!
