Block (XYZ) Was Long on Promise. That Story Is Starting to Change

Block’s (XYZ) growth story looks stronger as Cash App and Square reaccelerate, and that is why I remain bullish on this digital wallets and payment solutions company even after the stock’s sharp rebound. Shares are up roughly 40% since their February lows, reflecting improving investor confidence after a difficult stretch for fintech stocks. Still, I think there is more room for upside because the company is showing progress where it matters most: Cash App monetization, Square volume growth, product execution, and better operating leverage.

Block is not a simple payments story anymore. It is a two-sided financial ecosystem built around Square for sellers and Cash App for consumers. That model has always had promise, but the market has been waiting for cleaner execution. In the latest quarter, I think Block gave investors a stronger reason to believe that execution is finally improving.

Cash App Is Becoming More Valuable, Not Just Bigger

The standout in the quarter was Cash App. Cash App gross profit rose 38% year-over-year, its fastest growth pace in three years. That is important because Cash App’s long-term bull case is not just about adding users; it is about turning those users into deeper financial relationships. The evidence is encouraging. Primary banking users increased 18% year-over-year to 9.7 million, while inflows rose 14% to $88 billion. Consumer lending originations grew 82%, helped by rising adoption of Cash App Borrow and other financial products.

To me, this is the most important part of the story. Cash App is gradually moving from a peer-to-peer payments app into a broader banking and financial services platform. If more users treat Cash App as a primary financial account, Block can drive higher engagement, better retention, and more monetization per user over time.

The risk is that lending growth brings credit concerns. Transaction, loan, and consumer receivable losses rose sharply, driven mainly by higher loan volumes. Management says credit performance remains within expectations, but investors should watch this closely. I am bullish, but I do not think the market will give Block unlimited credit for lending growth unless loss rates remain controlled.

Square Is Finally Showing Better Momentum

Square has been the weaker part of the narrative for a while, so the recent improvement matters. Square gross payment volume (GPV) grew 13% year-over-year, including 8.2% growth in the U.S. and 26% constant-currency growth internationally. April trends also looked stable, with Square GPV up 12% constant currency, including 9% in the U.S. and 25% internationally.

That is a good sign because Square’s recovery depends on more than macro improvement. The company needs better distribution, stronger product bundling, and more traction with larger sellers. On that front, the expansion of Independent Sales Organization (ISO) partnerships looks promising. Block now has roughly 140 ISO partners, and those partnerships contributed about 200% quarter-over-quarter growth in seller adds.

International remains another underappreciated lever. Square still has significant room to grow outside the U.S., and the latest numbers suggest the company is gaining traction in markets where its penetration remains relatively low.

AI Is Starting to Show Up in Execution

I am usually cautious when companies overuse artificial intelligence (AI) as a buzzword, but Block’s AI story is becoming more tangible. Management said internal development velocity has improved materially, with code output up 2.5 times since January. New AI products are also scaling quickly. Moneybot reached more than 1 million users shortly after launch, while Managerbot is now used by more than 1 million sellers.

This matters because Block’s biggest historical issue has not been a lack of ideas; it has been the complexity of execution. The company has many products, many customer segments, and many growth initiatives. If AI helps smaller teams ship faster and improve product quality, it could meaningfully change the operating rhythm of the business.

That said, this is still early. The recent AI-led reorganization needs more time to prove that the improvements are durable rather than just a short-term productivity burst. I like the direction, but I want to see several quarters of consistent product velocity and revenue acceleration.

Guidance Supports the Bull Case

Block raised its 2026 outlook after the strong first quarter. Management now expects gross profit of $12.33 billion, up from $12.20 billion previously. Adjusted operating income guidance increased to $3.34 billion from $3.20 billion, while adjusted EPS guidance rose to $3.85 from $3.77.

That is not a dramatic raise, but it is directionally important. The company is not just growing; it is expanding profitability while continuing to invest. Adjusted EBITDA reached a record $1.0 billion in Q1, and Block ended the quarter with about $9.1 billion in liquidity, including $8.2 billion in cash.

Capital returns also help the story. Block repurchased 10.7 million shares in Q1 for $636 million, with authorization for up to an additional $5 billion. For a company that has often been criticized for spending discipline, the combination of growth, buybacks, and margin expansion is encouraging.

Valuation Is Reasonable if Growth Holds

Block is not screaming cheap, but I do not think the valuation is demanding given the improving setup. The stock trades at a Price-to-Operating-Cash-Flow ratio of about 12.12x, slightly above the sector median of around 10x. 

That premium is not excessive, especially if Cash App and Square continue to accelerate and AI-driven efficiency supports higher margins.

The key is sustainability. If Block can keep gross profit growing in the high teens to low 20s while expanding adjusted operating margins, the stock can justify a higher multiple. If credit losses worsen or Square’s momentum fades, the valuation could quickly look less attractive. For now, I think the balance of evidence favors the bulls.

Wall Street’s View

According to TipRanks, Block has a Strong Buy consensus rating, with 26 Buy, three Hold, and one Sell ratings. Based on 30 Wall Street analysts offering 12-month price targets, the average price target is $88.79, implying 25.24% upside from the recent price of $70.89.

Conclusion

Block’s latest quarter was not perfect, but it was a meaningful step in the right direction. Cash App is monetizing better, Square is reaccelerating, international growth remains strong, and AI appears to be improving product velocity and execution.

The stock has already bounced sharply from its lows, so expectations are no longer as washed out. Still, I think the setup remains attractive. If Block proves that this momentum is sustainable, the market may need to rethink the company’s growth profile and valuation.