Block shares drop on slowing Cash App user growth despite profit surge

Block Inc. shares dropped roughly 6 per cent the day after the company reported a significant earnings beat and raised its full-year guidance. Investors looked past the robust profit numbers to focus on a slowdown in user growth for its consumer-facing Cash App platform.

The payments group posted second-quarter adjusted earnings of $1.02 per share, surpassing Wall Street expectations of $0.87. Management also increased its annual forecasts across the board as second-quarter gross profit rose 25 per cent year on year.

Much of this margin expansion stems from aggressive cost-cutting measures implemented earlier this year. Block reduced its workforce by 40 per cent in February, betting that artificial intelligence tools would offset the reduction in engineering staff.

That strategy appears to be working, with code changes per engineer climbing 150 per cent since January. Management described the resulting operational efficiency as a durable shift rather than a temporary fix, helping push the adjusted operating income margin to a record 27 per cent.

The core merchant business also showed signs of stabilization and growth. Square’s US gross payment volume accelerated to its fastest rate since 2023, driven by more than 200 active independent sales organization partners that spurred 150 per cent quarterly growth in new sellers.

However, the underlying growth engine of Cash App is losing momentum. Monthly transacting actives on the platform increased by just 3 per cent year on year in June, marking a clear deceleration from the previous quarter.

Management now expects only low single-digit growth in active users for all of 2026. This projection points to a highly competitive landscape in mobile payments, overshadowing a 31 per cent jump in Cash App gross profit, a 17 per cent rise in commerce enablement volume, and a 59 per cent surge in consumer lending originations.

Adding to the negative sentiment was a share sale by chief financial officer Amrita Ahuja on the day of the earnings release. Ahuja sold 8,971 shares for approximately $770,000 under a pre-arranged trading plan adopted in March, reducing her direct stake by about 2 per cent.

While the transaction left her with 454,275 shares, insider selling coinciding with an earnings report often unnerves the market. The stock remains down more than 75 per cent from its 2021 peak, leaving investors highly sensitive to any signs of slowing consumer engagement.