Should You Stay Invested in Block Stock After Its Q2 Earnings Beat?

The key question now is whether Block can maintain stronger growth and margins while stepping up spending on sales, product development and AI. Its second-quarter results provided encouraging evidence, but the balance between growth investment and operating discipline remains important.

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Block’s Q2 Results Shows Better Growth and Profitability

Block delivered second-quarter adjusted EPS of $1.02, while revenues rose 9% year over year to $6.62 billion. Gross profit increased 25% from the prior-year period. More important for the longer-term earnings story, adjusted operating income reached $864 million, and the adjusted operating margin hit a record 27%.

Cash App remained the stronger growth engine, with gross profit rising 31% year over year. Monthly transacting actives increased 3% in June, while Cash App Commerce Enablement volume climbed 17%, and consumer lending origination volume increased 59%. Block is seeking to deepen engagement rather than relying only on user additions, an approach that could support monetization even if active-user growth remains modest.

Square also showed better momentum. Gross profit and gross payment volume both increased 13%, while U.S. GPV growth accelerated to its strongest pace since the second quarter of 2023. Management said new seller additions through independent sales organization partners increased more than 150% sequentially as Block continued expanding its distribution channels.

XYZ’s Raised Guidance Adds Support

Management increased its 2026 outlook following the stronger first half. Block now expects gross profit of $12.51 billion, representing 21% year-over-year growth, along with adjusted operating income of $3.47 billion and a 28% margin. Adjusted EPS is expected to grow 70% for the full year. For the third quarter, management expects gross profit growth of 18% and another 28% adjusted operating margin.

The raised outlook is encouraging because it reflects more than the second-quarter beat. Management said performance heading into the third quarter remained healthy, with Square GPV growth in July consistent with second-quarter strength and Cash App inflows and monetization trends remaining solid.

New Products Could Broaden Growth of Block

Block is also trying to create stronger links between Square and Cash App. Neighborhoods is an important part of that effort. Annualized seller GPV on the platform crossed $1 billion in June, up 220% year over year, while seller onboarding accelerated sharply into July.

Product development has accelerated as well. Block said code changes per engineer increased 150% since the start of 2026, while Square shipped 130 features during the first half, more than three times the number delivered in the comparable 2025 period.

The opportunity comes with added costs. Management plans to increase investment in go-to-market efforts, Neighborhoods and AI when it sees attractive returns. This strategy could support longer-term growth, but investors will want evidence that higher spending does not interrupt recent margin progress.

XYZ’s Earnings Estimate Revision Trends Upward

The Zacks Consensus Estimate for Block’s 2026 sales calls for a year-over-year rise of 7.50%, while that for earnings per share (EPS) suggests a 65.40% increase year over year. EPS estimates for both 2026 and 2027 have been trending upward over the past month.

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XYZ's Valuation Remains Reasonable

Block's valuation looks more balanced after its earnings and profit growth improved, although it should be viewed alongside expectations for continued execution. In terms of forward 12-month Price/Earnings (P/E), Block is trading at 17.05X, which is at a discount to Toast’s 21.32X, but at a premium to PayPal’s 10.50X. 

Block's premium to PayPal can be supported if gross-profit growth remains strong and margins continue expanding. At the same time, comparisons with Toast show that investors are already willing to pay more for faster payments and merchant-technology growth, leaving Block with less room for execution setbacks.

Valuation

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What Should Investors Do With XYZ Stock?

Block's second-quarter report strengthened the investment case without removing the reasons for caution. Gross profit growth accelerated, profitability reached record levels, and management raised its full-year outlook. Square's improving GPV trends and deeper Cash App engagement also provide several ways to sustain growth into 2027.

Still, the post-earnings share-price decline shows that investors are watching spending closely. Cash App active growth remains modest, lending growth should normalize, and increased AI and sales investments could limit additional margin expansion if returns take time to emerge. For existing investors, the improving fundamentals support staying with the position while waiting for clearer evidence that Block can sustain stronger growth and disciplined spending together.

At present, Block carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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