Block Needs Square's Surge To Outrun Cash App's Slowdown As Shares Lag

Block heads into its third-quarter report with an odd mismatch between its fundamentals and its stock. Management has raised its full-year outlook on three consecutive calls, posted a record adjusted operating margin last quarter, and pointed to a growing list of new products. Yet the shares have fallen 11% since the last report while the S&P 500 barely moved. The release after the close on November 3 has to settle which story deserves more weight: an accelerating Square business and widening margins, or a Cash App engine whose growth is cooling as its lending boom matures.

The bar is set high in absolute terms. Analysts expect non-GAAP earnings of $1.03 a share, essentially matching management's own guidance of about $1.02, on revenue of $6.61 billion. That revenue figure would represent growth of about 8% from a year ago, which is modest, but the earnings line tells a different story. Against $0.54 in the year-ago quarter, the consensus implies profit nearly doubling, and it would be a sharp step up from the $0.63 reported last quarter. The whisper number of $1.10 sits meaningfully above both consensus and guidance, suggesting the more engaged crowd expects Block to clear its own forecast comfortably rather than just meet it. Management's full-year target of roughly $4.02 a share, up from $3.85 previously, means a merely in-line quarter would leave little room for the momentum that bulls have come to expect.

Square is the part of the story that must keep delivering. Last quarter, U.S. payment volume grew at its fastest pace since mid-2023, global volume rose 13%, and food and beverage climbed 20%. Importantly, Square gross profit is now growing roughly in step with volume, a sign the company is not buying growth with price cuts. The distribution push through independent sales organizations, now more than 200 partners versus about 100 two quarters earlier, drove a 150% sequential jump in new sellers. If those sellers are real, they should show up as sustained or faster volume growth this quarter. A slip back toward the low double digits would undercut the claim that the sales engine has truly turned.

Cash App is the counterweight. Gross profit growth slowed to 31% last quarter from 38% in the first quarter as lending laps its extraordinary 2025 ramp, and monthly actives grew just 3%. Management framed this as expected normalization, so a further gentle deceleration would not be alarming. What matters is whether the new levers start contributing. Neighborhoods, which crossed $1 billion in annualized seller volume in June, was billed as a driver of Cash App actives in the second half, making this the first real test of that promise. The viral Tags hardware launch and the new Square savings product, which lets Block fund loans with cheaper deposits, are earlier-stage but worth tracking, along with credit quality as lending cohorts season.

Margins are the other swing factor. Management flagged memory and hardware cost inflation it likened to a once-in-a-century flood, plus rising AI computing budgets. Both were described as manageable, so any sign they are eating into the 27% to 28% margin trajectory would draw scrutiny.

Sentiment has warmed slightly, moving to roughly neutral from mildly bearish before the last report, even as the stock trades near the bottom of its post-earnings range and only modestly above its 200-day average. That combination means expectations are cautious on price but demanding on numbers. The narrative stays intact if Square's acceleration holds, Cash App's slowdown stays orderly, and margins absorb the new cost pressures well enough for management to nudge the full-year outlook higher a fourth time.

This earnings preview was originally published on Earnings Whispers.

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