Block (NYSE: XYZ) — Q2 2026 Earnings Preview

Timing correction: Block is scheduled to report today, Wednesday, August 5, 2026, after the market close, with its earnings call at 5:00 p.m. ET—not tomorrow.[^1]

Preview thesis

Block enters Q2 with strong operating momentum but a more demanding setup. In Q1, it materially exceeded guidance, accelerated gross-profit growth to 27%, expanded adjusted operating-income margin to 25%, and raised full-year targets. The Q2 report needs to confirm that momentum is durable—not simply Borrow-led—and that Square’s improving GPV growth, Cash App engagement, and AI-enabled product velocity can support the company’s mid-teens growth framework beyond 2026.

The central debate is straightforward: can Block sustain a high-growth, expanding-margin profile as Cash App Borrow growth normalizes? A beat versus the company’s Q2 guide will matter, but the more consequential variables are the composition of gross-profit growth, lending-credit performance, Square’s conversion of GPV growth into gross profit, and whether full-year guidance moves higher again.

The numbers to anchor on

Metric	Q2 2026 company outlook	Q2 2025 actual	Implied YoY growth
Gross profit	$3.04B	$2.54B	20%
Adjusted operating income	$740M	$550M	35%
Adjusted operating-income margin	24%	22%	~2 pts
Adjusted diluted EPS	$0.86	$0.62	39%

Block’s full-year outlook, raised after Q1, calls for $12.33B of gross profit (+19%), $3.34B of adjusted operating income (27% margin), and $3.85 of adjusted diluted EPS (+62%).[^1]

What matters most in the print

1. Cash App: Can engagement and monetization offset normalizing Borrow growth?

Cash App was the principal Q1 growth engine: gross profit grew 38% year over year to $1.91B. The strongest contributors were Cash App Borrow, Afterpay/BNPL and Cash App Card activity. Consumer-lending originations rose 82%, while Cash App commerce-enablement volume rose 18% to $55.0B.[^1]

For Q2, investors should focus on:

• Borrow and BNPL originations: Management explicitly indicated Borrow growth would begin to normalize against difficult comparisons. The key is whether other credit products—especially Afterpay post-purchase and the newer pre-purchase offering—take a larger role.
• Credit quality: Q1 risk outcomes were described as healthy, with Borrow loss rates declining across more seasoned customer cohorts. Given the rapid expansion of lending balances, stable losses and reserve trends are essential.
• Primary Banking Actives (PBAs): PBAs reached 9.7M, up 18% year over year, in Q1. Management expected a modest sequential Q2 decline due to normal seasonality, so year-over-year growth and customer inflows are more informative than the sequential headline.
• Monthly transacting actives: Q1 actives were 59M, up 4% year over year. Block continues to guide to low-single-digit active growth in 2026; investors will want evidence that newer products such as Cash App Green, managed accounts, Cash App Score, Neighborhoods and Moneybot are improving network growth over time.

What would be constructive: sustained double-digit inflow-per-active growth, stable/positive commerce monetization, continued PBA expansion, and lending growth that moderates in an orderly manner without a deterioration in losses.

2. Square: Is the GPV acceleration translating into gross-profit acceleration?

Square’s Q1 GPV growth improved to 13% reported and 11.5% constant currency, with U.S. growth of 8.2% and international growth of 26% on a constant-currency basis. Yet Square gross profit grew only 9%, reflecting hardware costs and prior processing-related headwinds.[^1]

The Q2 setup is favorable but nuanced:

• In April, management said Square GPV grew 12% in constant currency, including 9% in the U.S. and 25% internationally.
• Management expected the gap between GPV and Square gross-profit growth to narrow in Q2.
• The quarter includes two unusual comparability items: a one-time hardware tariff refund that benefits gross profit, partially offset by lapping a network-remediation payment received in Q2 2025.[^2]

The cleanest read-through is therefore not merely reported Square gross-profit growth. Investors should examine gross profit excluding hardware and one-time items, GPV retention, new-volume-added growth, and commentary around pricing and packaging.

What would be constructive: Square gross profit trending closer to GPV growth, continued strength in food & beverage, mid-market and international sellers, and confirmation that field sales and ISO partnerships are producing attractive paybacks.

3. Margins: Can Block invest harder while holding the earnings algorithm?

The Q2 guide already embeds a substantial step-up in go-to-market investment. In Q1, adjusted operating income grew 56% to $728M, while non-GAAP product-development expense declined and sales-and-marketing investment rose, especially at Cash App.[^1]

The question for Q2 is whether Block can simultaneously:

1. Fund growth investments in Square distribution and Cash App acquisition;
2. Preserve a mid-20s adjusted operating-income margin; and
3. Keep its raised full-year margin outlook intact or improve it.

The Q1 GAAP loss is less relevant to the core setup because it included $852M of restructuring and legal-contingency-related charges, as well as a bitcoin remeasurement loss. Still, investors should monitor any incremental restructuring, legal, regulatory, or compliance charges because they can affect GAAP earnings, cash flow, and sentiment.[^1]

4. AI: Product engagement needs to become measurable business value

AI is now central to Block’s narrative. The company says internal AI tools have increased code changes per engineer by more than 2.5x since January, while Moneybot is live in Cash App and Managerbot has been rolled out broadly to Square sellers.[^1]

The investment case does not require material near-term AI revenue. It does require evidence that the initiatives improve one or more of:

• Product-release velocity;
• Cash App engagement and cross-sell;
• Seller retention and ecosystem attachment;
• Customer acquisition efficiency; or
• The expense/productivity structure.

Metrics or commentary around Moneybot actions, Managerbot retention, Neighborhoods adoption, cross-sell behavior, and the timing of monetization would be meaningful incremental catalysts.

Guidance is likely to drive the stock more than the Q2 beat

Block’s Q1 results and raised outlook set a relatively high bar. At the August 4 close of $84.66, XYZ had appreciated about 21% since the Q1 earnings date on May 7. That performance suggests investors have already rewarded the accelerating growth, margin expansion, and AI/product-velocity story.

Accordingly:

• Bullish outcome: Q2 gross profit and adjusted operating income exceed the guide, Cash App credit trends remain clean, Square gross profit closes the gap with GPV growth, and management raises—or at least signals upside to—full-year targets.
• Mixed outcome: A modest headline beat but lower-quality composition: Borrow deceleration sharper than expected, Square monetization remains weak, or the tariff refund inflates the quarter without improving the second-half trajectory.
• Bearish outcome: Credit losses/reserves rise meaningfully, Cash App engagement slows, Square GPV decelerates, or the company maintains guidance while citing macro, credit, regulatory, or execution uncertainty.

Key questions for the call

1. Cash App lending: How quickly is Borrow growth normalizing, and what are the early originations, repayment, and loss trends for newer BNPL products?
2. Square monetization: What is the normalized Q2 Square gross-profit growth rate excluding hardware, the tariff refund, and prior-year remediation effects?
3. Second-half outlook: Does management still expect to exit 2026 at mid-teens gross-profit growth, and what is the expected split between Cash App and Square?
4. Go-to-market ROI: Are field sales, ISOs, and Cash App marketing continuing to meet target payback periods as spending rises?
5. AI monetization and KPIs: What concrete evidence exists that Moneybot, Managerbot, and Neighborhoods are improving retention, product attachment, or acquisition?
6. Capital and risk: With lending assets scaling rapidly, what are the funding, reserve, and loss-rate assumptions embedded in the 2026 outlook?

Bottom line

Block has earned a stronger valuation setup through Q1 execution: gross-profit growth accelerated, margins expanded, Square GPV improved, Cash App monetization deepened, and the company raised full-year guidance. For Q2, the threshold is no longer simply a beat. Investors will want confirmation that Cash App’s growth is broadening beyond Borrow, Square’s GPV acceleration is converting to gross profit, and the higher-investment plan can coexist with sustained margin expansion.

[^1]: Block Q1 2026 shareholder letter and earnings call, May 7, 2026.
[^2]: Block Q1 2026 earnings call, management commentary on April Square trends and Q2 comparability items.