Results Beat Expectations, Earnings Guidance Raised, Further Confirming Block’s Operating Inflection

Overview

Block delivered a solid beat in 2Q 2026 despite elevated market expectations and raised its earnings guidance. Key highlights included faster U.S. Seller GPV growth, continued strong growth in Cash App primary banking active users, and margin expansion from headcount reductions. Goldman Sachs believes the company’s multi-year transformation is beginning to bear fruit and reiterated its Buy rating.

Core views

First, Square’s business momentum improved, with U.S. Seller GPV up 10% year over year and Seller gross profit ahead of expectations, while the company’s guidance for Seller gross profit to grow in line with transaction volume in the second half may prove conservative. Second, Cash App revenue was in line with expectations, segment gross profit exceeded expectations, and primary banking active users maintained high-teens growth despite tougher comps. Third, adjusted operating income significantly exceeded expectations, and operating leverage released by recent headcount reductions is expected to continue into the first half of 2027. Fourth, based on Goldman Sachs’ 2027 EPS forecast, the stock trades at approximately 15x earnings and remains attractive.

Analysis framework

The report compares quarterly actual results with Visible Alpha consensus estimates item by item, focusing on total gross profit, segment gross profit, Seller GPV, Cash App active users, adjusted operating margin, and EPS; it then incorporates the company’s quarterly and full-year guidance to revise earnings forecasts and determines the 12-month target price using a forward EPS multiple.

Methodology notes

• Earnings AnalysisComparison of Actual Results with Consensus Expectations

  Assess the degree of earnings beat by comparing actual results, market consensus expectations, and company guidance.

  The report focuses on comparing gross profit, Cash App and Square segment performance, adjusted operating income, and EPS, and uses these to assess operating momentum and earnings quality.

• Valuation methodsForward P/E Valuation

  Apply a target P/E multiple to estimated forward EPS for the 5th through 8th quarters.

  Goldman Sachs maintained its 18x valuation multiple and, based on EPS forecasts for the 5th through 8th quarters, raised its 12-month target price from $103 to $107.

• Earnings ForecastManagement Guidance and Quarterly Trend Forecasting

  Adjust future-year earnings forecasts by incorporating management guidance, the macro environment, and quarterly operating trends.

  The report revised adjusted EPS forecasts for 2026, 2027, and 2028 to $4.04, $5.37, and $6.53, respectively, versus prior forecasts of $3.95, $5.40, and $6.59.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Block Inc. (XYZ.US)

  Direct research subject

  Strengths

  Square’s U.S. Seller GPV growth increased to 10%, Cash App primary banking active users maintained high-teens growth, adjusted operating margin reached 28%, and cost reductions delivered clear operating leverage.

  Weaknesses

  GAAP net income and GAAP EPS were significantly below market expectations, and parts of the business still face unfavorable comparisons related to prior payment processing and Square Capital factors.

  Comparison

  Compared with market consensus expectations, second-quarter total gross profit was 4% higher, Cash App and Square segment gross profit were each 3% higher, and adjusted operating income was approximately 18% higher.

  Risks

  Macro deterioration, intensifying competition, unfavorable regulation, and Square and Cash App growth falling short of expectations.

Key data

• 2Q 2026 total gross profit$3.166 billion4% above Visible Alpha consensus expectations.
• Cash App segment gross profit$1.97 billion3% above consensus expectations; segment revenue was $4.02 billion, in line with expectations.
• Square segment gross profit$1.16 billion3% above consensus expectations; segment revenue was approximately $2.50 billion, 2% above expectations.
• Adjusted operating income$875 millionMargin of 28%, above market expectations of $744 million and 24%.
• Adjusted EPS$1.02Above Visible Alpha consensus expectations of $0.87.
• GAAP EPS$0.15Below consensus expectations of $0.68; GAAP net income was $89 million.
• FY2026 adjusted operating income guidance$3.47 billionCorresponding to a 28% margin, approximately 3.5% above consensus expectations.
• FY2026 adjusted EPS guidance$4.02Approximately 3% above consensus expectations.
• 12-month target price$107.00Raised from $103, implying 27.1% upside from the current price of $84.20.

Impact & implications

Stronger-than-expected profit performance and the raised full-year guidance indicate that Block is not only sustaining revenue and gross profit growth but is also significantly improving earnings conversion through cost control. If Square continues its accelerating trend and Cash App maintains mid-to-high-teens growth, earnings growth and valuation re-rating could jointly drive share performance; however, GAAP profit below expectations also highlights the continued gap between adjusted earnings and accounting profit.

Risks

• Macro deterioration could weigh on merchant transaction volume, consumer spending, and credit performance.
• Intensifying competition in payments and fintech could affect user growth, pricing power, and margins.
• Adverse regulatory changes could increase compliance costs or restrict product expansion.
• If Square’s growth improvement is not sustained, the company’s second-half Seller gross profit could fall below expectations.
• GAAP earnings were significantly below consensus expectations, and the gap between adjusted metrics and accounting profit warrants attention.

What to watch

• Whether total gross profit in 3Q 2026 can reach the $3.13 billion guidance.
• Whether third-quarter adjusted operating income can reach $875 million and a 28% margin.
• Whether U.S. Seller GPV growth continues to exceed 10%.
• Whether Cash App primary banking active users can maintain mid-to-high-teens growth.
• Whether operating leverage from headcount reductions can continue into the first half of 2027.
• Whether second-half Seller gross profit growth exceeds the company’s guidance for growth in line with transaction volume.