Shares in Block Inc. fell almost 2% in late trading today despite the payments and financial services company beating Wall Street expectations for second-quarter earnings and revenue and raising its full-year outlook for the second consecutive quarter.

For the quarter that ended on June 30, Block reported adjusted earnings of $1.02 per share, up 65% from 62 cents in the same quarter of the previous year, on revenue of $6.62 billion, up 9% year-over-year. Analysts were expecting 87 cents per share on revenue of $6.49 billion.

Gross profit, Block’s headline growth measure, rose 25% to $3.17 billion and landed above the company’s own guidance. Adjusted operating income grew 57% to a record $864 million, pushing the adjusted operating margin to 27% of gross profit, an all-time high for the company. Adjusted EBITDA hit a record $1.17 billion.

The unadjusted figures were softer. Operating income slipped to $447 million from $484 million a year ago and net income attributable to common stockholders fell to $89 million from $538 million, leaving unadjusted diluted earnings of 15 cents per share against 87 cents in the same quarter last year. Operating expenses for the quarter included $365 million in contingencies, restructuring and other charges.

Cash App again did most of the work. Gross profit from the consumer app grew 31% to $1.97 billion, with its financial solutions category up 51% and commerce enablement up 26%. Consumer lending originations rose 59% to $18.9 billion on the back of Cash App Borrow, and primary banking activities grew 17% to 9.4 million in June. Monthly transacting actives grew 3% to 59 million in June. Transaction, loan and consumer receivable losses nearly doubled year-over-year on an unadjusted basis as loan volumes climbed.

Square gross profit rose 13% to $1.16 billion on gross payment volume of $72.8 billion, also up 13%. U.S. volume growth accelerated to 10%, the strongest rate since the second quarter of 2023, while international volume grew 28%. A one-time tariff reimbursement booked in the quarter added roughly two points to Square’s gross profit growth, which the company said roughly offset the lapping of a network remediation payment a year earlier.

Block’s bitcoin business kept shrinking. Bitcoin ecosystem revenue fell to $1.89 billion from $2.17 billion and gross profit from the segment dropped 31% to $72 million, which the company attributed to a decision to cut fees on certain bitcoin transactions in Cash App and to trading conditions.

The margin expansion follows the 40% workforce reduction Chief Executive Jack Dorsey announced in February as part of an AI-native restructuring of the company. Dorsey devoted most of his shareholder letter to arguing that Block’s edge in AI comes from owning infrastructure rather than models, pointing to internal tools including its goose agent framework and Buzz, an agent collaboration system launched in July, alongside Moneybot, the customer-facing assistant that now has more than 1 million weekly engaged accounts.

“AI will make software creation abundant. Judgment, trust, depth of understanding, and capability will become scarce,” Dorsey wrote. “Our advantage is that we understand which things matter for the customers we serve, we own the hard capabilities behind them, and we’ve connected them into a network that compounds with every seller and every customer who joins.”

Product launches in the quarter included Cash App Tags, a line of tap-to-pay hardware that Block said sold out within hours of each drop, and Cash App Mobile, a $40-per-month unlimited 5G wireless plan. The company also added stablecoin support through an integration with USDC. Square has now enabled Neighborhoods, its loyalty and discovery product, for sellers representing $1 billion in annualized gross payment volume, up more than 220% since March.

For the third quarter, Block forecast gross profit of $3.13 billion, up 18%, adjusted operating income of $875 million and adjusted diluted earnings of $1.02 per share. Analysts were looking for $1.01. Full-year gross profit guidance was lifted to $12.51 billion from the $12.33 billion the company projected in May, alongside adjusted operating income of $3.47 billion and adjusted diluted earnings of $4.02 per share, up 70% on 2025.

Block repurchased 11.6 million shares for $701 million so far this year and closed the quarter with $8.8 billion in total liquidity. Third-quarter results are scheduled for Nov. 3.

Image: Block