Block's Profits Jumped 65%. Wall Street Sold Anyway.

Block Inc. did almost everything right on August 5. Then Wall Street sold the stock anyway.

The company, formerly known as Square, reported adjusted earnings per share of $1.02 for the second quarter, a 65% jump from a year earlier and well above the $0.87 analysts expected, according to Yahoo Finance. Revenue came in at $6.62 billion, beating the roughly $6.48 billion Wall Street projected, according to TIKR. Gross profit climbed 25% year-over-year to about $3.17 billion, and adjusted operating income margin hit an all-time company record of 27%, according to Crypto Briefing.

Management was confident enough to raise full-year guidance for the third consecutive quarter, targeting $12.51 billion in gross profit and a 28% adjusted operating margin, according to TIKR. CFO Amrita Ahuja called it record profitability, plain and simple.

Shares fell 6% the next trading session anyway, closing at $79.02, according to Simply Wall St and TIKR.

The Number That Spooked Traders

The culprit was Cash App, Block's consumer payments arm. Monthly transacting actives grew just 3% year-over-year in June, a deceleration from the prior quarter's 4% pace, according to the Motley Fool. Management is now guiding for only low-single-digit actives growth for all of 2026.

That is a serious slowdown for what has been Block's flagship growth story since Cash App launched. Square, the merchant-facing business, actually accelerated: U.S. gross payment volume grew at its fastest pace since 2023, and international GPV was up 28%, according to the Motley Fool. Neighborhoods, the program linking Square sellers to Cash App customers, crossed $1 billion in annualized seller volume, up 220% year-over-year, according to Simply Wall St.

So the bear case isn't that Block's business is broken. It's that the company's most recognizable growth engine, the app tens of millions of people use to send money and buy stock, has stopped adding new users at any meaningful pace. Management says that's partly intentional, prioritizing revenue per user over raw user growth. Investors clearly want proof that strategy works before they'll pay up for it.

The AI Story Behind the Margins

The efficiency gains are real and traceable to a specific decision. Block cut its workforce by 40% in February, citing AI tools that made engineers more productive, according to the Motley Fool and AOL. Code changes per engineer are up 150% since the start of the year. CFO Ahuja told investors that shift "ultimately drives improved efficiency over time and greater leverage to our business over time."

Management expects full-year earnings to grow 70%. That's an aggressive internal target, not a guaranteed outcome, and it depends on the AI productivity gains holding up rather than fading once the easy cuts are done.

There's a legitimate case for skepticism here too. GAAP earnings per share came in at just $0.15, dragged down by an $88.5 million unrealized loss on Block's Bitcoin holdings and restructuring costs, according to TIKR. Net income and basic EPS fell more than 80% year-over-year even as adjusted numbers hit records, according to Simply Wall St. That gap between adjusted and GAAP results is exactly the kind of thing skeptical investors flag when a company leans hard on adjusted metrics to tell its story. Simply Wall St also noted Block has faced fraud-related settlements totaling more than $200 million, a real and material cost that sits below the adjusted-margin headline.

The Insider Sale That Drew Attention

CFO Amrita Ahuja sold 8,971 shares on the same day as the earnings report, a transaction worth about $770,000, according to Yahoo Finance. The sale was executed under a Rule 10b5-1 trading plan adopted back in March, meaning it was scheduled in advance and not a discretionary decision made in reaction to the earnings print. It trimmed her direct stake by roughly 2%, leaving her with 454,275 shares.

No regulatory action, inquiry, or allegation of wrongdoing has been reported in connection with that sale. Pre-scheduled 10b5-1 sales by executives are common and legal, precisely to avoid the appearance of trading on inside information. Still, insider selling that lands on an earnings date draws scrutiny by default, and Yahoo Finance was right to flag the timing even while noting the plan behind it.

Where That Leaves the Stock

Despite the post-earnings drop, Block shares are still up roughly 21% for 2026, from a $65.09 close at the end of last year to the post-earnings $79.02, according to TIKR. This was a single-session pullback from a stock trading near 52-week highs, not a collapse. The stock remains down more than 75% from its 2021 peak, according to Yahoo Finance, a reminder of how far Block has fallen from its pandemic-era valuation even after this year's rebound.

The forward price-to-earnings ratio sits around 20, with analysts projecting roughly 25% annualized earnings growth, according to AOL. Whether that growth materializes depends on something Block can't fully control: whether Cash App's next products, Cash App Tags, Cash App Mobile, and the Neighborhoods expansion, can reignite user growth before the efficiency gains from AI-driven headcount cuts run out of room to keep boosting margins on their own.