Block shares fell about 6% after its second-quarter report, even as adjusted earnings per share jumped 65% year over year. Investors focused on slowing growth in Cash App's user base rather than the earnings beat itself, while other metrics point to AI-driven cost cuts and stronger payment volumes elsewhere in the business.
Block, formerly known as Square, delivered its second-quarter results after the close of trading on Aug. 5, and shares fell about 6% the next day. The drop came despite a jump in profitability, as investors instead focused on weakening growth in Cash App's monthly transacting actives.
AI-driven efficiency lifts profit
Adjusted earnings came in at $1.02 per share, well above the $0.87 per share consensus estimate. In February, Block cut its workforce by 40%, citing AI tools that are making software engineers more productive. The number of code changes per engineer is up 150% since the start of the year.
CFO Amrita Ahuja said the shift "drives improved efficiency over time and greater leverage to our business over time." Management now expects full-year earnings to grow by 70%.
Cash App growth cools while payments accelerate
Cash App's monthly transacting actives grew just 3% year over year, a deceleration from 4% growth in the prior quarter, and management is guiding for low-single-digit percentage growth for the full year. Still, other metrics show momentum elsewhere in the business.
Square's gross payment volume in the U.S. accelerated to 10% year over year, with international volume up 28%. Cash App consumer lending originations rose 59%, and commerce enablement volume grew 17%.
Shares still well below 2021 highs
Block stock remains down more than 75% from its 2021 peak, reflecting slower growth and intensifying competition in fintech. At $79 per share, the stock trades at about 20 times forward earnings, while analysts expect roughly 25% annualized earnings growth over the next several years.
Source: The Motley Fool
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