What Should Investors Do With XYZ Stock Ahead of Q2 Earnings?

For the current year, the Zacks Consensus Estimate for Block’s revenues is pegged at $26.14 million, indicating a year-over-year rise of 8.05%. The consensus mark for 2026 EPS stands at $3.90, calling for a 64.56% expansion from the year-ago period’s actual.

Image Source: Zacks Investment Research

Over the trailing four quarters, the company’s EPS surpassed the Zacks Consensus Estimate on two occasions, met in another and missed in the other period, the average beat being 3.51%. This is depicted in the graph below:

Here Is What Our Quantitative Model Predicts for XYZ

Our proven model does not conclusively predict an earnings beat for XYZ this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

Block currently has an Earnings ESP of 0.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

What Should Investors Expect From Block's Q2 Earnings?

Block heads into its second-quarter earnings release with management targeting gross profit of $3.04 billion (suggesting a 20% year-over-year jump), adjusted operating income of $740 million and adjusted EPS of 86 cents. The quarterly results will reflect whether momentum from early 2026 continued and whether operating margin expanded by roughly two percentage points as guided.

Cash App is expected to have supported gross profit through healthy inflows, deeper engagement and wider use of lending products. Pay Over Time for eligible peer-to-peer transfers and broader BNPL integration are likely to have contributed to transaction activity. Still, a seasonal decline in primary banking activities may have constrained sequential user growth.

Square is expected to have benefited from strength among food-and-beverage, mid-market and international sellers. Expanding field sales and ISO partnerships are expected to have improved revenue visibility, while the MarketMan restaurant inventory integration could have strengthened software adoption and retention. Higher go-to-market spending, however, is expected to have pressured profitability.

Block’s faster product rollout may also have supported the quarter. Wider availability of Moneybot and Managerbot is likely to have improved engagement, cross-selling and productivity, while Neighborhoods may have connected more Square sellers with Cash App users. AI-led efficiency is anticipated to have strengthened operating leverage, though continued investment is likely to have affected margins in the quarter under review.

Bitcoin is expected to have added volatility to the quarterly performance. Block preliminarily expects $1.8 billion in Cash App Bitcoin Ecosystem revenues and an $88.5-million remeasurement loss on its Bitcoin investment. The loss could have hurt GAAP earnings, but investors are likely to focus more on gross profit, adjusted profitability and execution across the company’s two main ecosystems.

XYZ’s Price Performance & Valuation

Block shares have gained 26.1% year to date, outperforming its peers, such as Affirm AFRM and StoneCo STNE, as well as the S&P 500 composite. Year to date, Affirm shares have inched up 1.6%, while StoneCo shares have declined more than 23%.    

Image Source: Zacks Investment Research

In terms of forward 12-month Price/Earnings (P/E), Block is trading at 17.97X, which is at a discount to its industry’s 27.32X, as well as its one-year median of 33.70X. While Block is also trading at a discount to Affirm’s 41.71X, it is at a premium to STNE’s 4.99X.

Image Source: Zacks Investment Research

How to Play XYZ Stock Ahead of Q2 Earnings?

Block appears well-positioned to deliver another quarter of healthy underlying growth, supported by improving Cash App engagement, expanding Square merchant adoption and continued AI-driven product innovation. Management's second-quarter guidance already reflects confidence in sustained gross profit growth and margin expansion, while offerings introduced during the quarter are anticipated to have strengthened customer activity and long-term monetization opportunities.

However, normalization in Borrow growth, seasonal trends in banking activities, higher go-to-market investments, and bitcoin-related earnings volatility could temper near-term investor enthusiasm. Given this balanced outlook, maintaining current exposure appears appropriate until the company demonstrates sustained execution against its raised financial targets.

Research Chief Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research