Block grew gross profit 25% to $3.17B on Cash App Borrow and faster Square volume, but net income fell 84% to $88.5M due to legal accruals, a bitcoin markdown and a 71% tax rate. Full-year guidance was raised.
Revenue
$6.6B
+9.3% YoY
Net income
$89M
-83.6% YoY
Diluted EPS
$0.15
-82.8% YoY
Operating margin
6.8%
Overview
Block (the company behind Square and Cash App) grew gross profit 25% to $3.17 billion in the quarter ended June 30, 2026. The growth came mostly from Cash App's lending products. Profit on the income statement moved the other way: net income attributable to common stockholders fell 84% to $88.5 million and diluted EPS fell to $0.15 from $0.87. Three things caused the gap, and none of them is weak demand:
Legal and regulatory accruals. An accrual is an estimated cost booked before the cash is paid. These accruals added $294.9 million to general and administrative expense compared with a year earlier. The 10-Q says Block has now set aside $526 million for an ongoing Department of Justice inquiry.
Bitcoin price swings. Block marks the roughly 9,117 bitcoin it holds as an investment to market value every quarter. That produced an $88.5 million loss this quarter, against a $212.2 million gain in Q2 2025.
A 71% effective tax rate ($214.4 million of tax on $301.5 million of pre-tax income). The company says this was "primarily driven by the tax impact of non-deductible accruals related to certain litigation and regulatory matters." In other words, the legal charges cut pre-tax profit but don't reduce taxable income.
Excluding these items, the business had its most profitable quarter to date. Adjusted operating income, Block's own measure that leaves out legal and regulatory charges, restructuring and amortization, rose 57% to a record $863.8 million.
Why Block measures itself on gross profit, not revenue
When a Cash App user buys bitcoin, Block counts the full purchase price as revenue and the cost of buying that bitcoin as a nearly equal expense. As a result, bitcoin inflates revenue while adding very little profit. This quarter, bitcoin was 29% of Block's revenue but only 2% of its gross profit (revenue minus the direct cost of providing the service). Bitcoin revenue fell 13% to $1.89 billion because of "lower bitcoin trading volume and a lower average market price of bitcoin," but the profit Block kept on it was only about $72 million ($1,893.7M revenue minus $1,821.3M cost), down from about $105 million.
So headline revenue growth of 9% understates the business. Revenue excluding bitcoin grew 22%, and gross profit grew 25%. Gross profit is the figure management guides to and the one that best reflects how the business is doing.
Key metrics
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Revenue excluding bitcoin is total net revenue minus bitcoin ecosystem revenue, as reported in the 10-Q. Adjusted figures are Block's non-GAAP measures from its 10-Q reconciliation. Operating margin here uses revenue, which bitcoin inflates, so it looks thin next to Block's own gross-profit-based margin.
Takeaway: The gap between a 57% jump in adjusted operating income and an 84% fall in GAAP net income is almost entirely legal accruals, a bitcoin mark-to-market swing and the tax those accruals can't offset. The operating question is Cash App lending. Borrow is the main reason Cash App gross profit grew 31%, but it also drove loan losses up 177%, and Block's consumer loan book shows more late payments than it did in December.
Cash App: lending is the growth engine
Cash App gross profit rose 31% to $1.97 billion. Cash App revenue grew only 5% because bitcoin sales shrank. Excluding bitcoin, Cash App revenue grew 32%. Bitcoin was 45% of Cash App's revenue but only 3% of its gross profit.
The two drivers named in the 10-Q:
Financial solutions revenue +40% to $1.38 billion, mostly from Cash App Borrow, Block's short-term consumer loan product. Borrow revenue rose $281.1 million "as we continued to expand access to the product, resulting in higher origination volumes." (Originations are new loans issued.)
Commerce enablement revenue +15% to $3.34 billion. Within that, Square processing added $218.1 million, Cash App Card (the Cash App debit card) added $76.2 million, and Afterpay Post-Purchase added $62.1 million. Post-Purchase lets a customer split a debit-card purchase into installments after paying, a "buy now, pay later" (BNPL) product.
Figures from Block's Q2 shareholder letter (8-K Exhibit 99.1), not the 10-Q:
User growth is almost flat: 59 million monthly actives, up 3%, and unchanged from Q4 2025 and Q1 2026. Growth comes from getting more out of each user. Each active brought in 9% more money ("driven in part by more customers bringing their paychecks into Cash App," per the letter), and more users are borrowing. Primary banking actives are users who deposit their pay into Cash App or spend at least $500 a month through it. That group grew 17%, which matters because those users do the most borrowing and spending.
Square: payments volume accelerating in the US
Square gross profit rose 13% to $1.16 billion, the fastest growth in the five quarters shown in the letter (9% in Q1 2026). The 10-Q attributes it to Square processing, Square software and Square Loans. According to the letter:
Square gross payment volume (GPV, the dollar value of card and bank payments Square's sellers process) grew 13% to $72.8 billion. US GPV grew 9.8%, which the letter calls the fastest US rate since Q2 2023. International GPV grew 28%, or 25% in constant currency (excluding exchange-rate effects).
Food and beverage sellers' GPV grew 20%.
A one-time tariff reimbursement added about 2 percentage points to Square's gross profit growth. The letter says this roughly offset a prior-year network payment that didn't repeat, so the 13% is not overstated overall. Block expects Square gross profit "to grow roughly in line with Square GPV in the second half of the year."
Credit losses: the number to watch
Transaction, loan and consumer receivable losses (Block's provision for expected bad debts plus fraud and chargeback losses) doubled to $585.5 million. That equals 18% of gross profit, up from 12%. The breakdown:
Block gives two reasons the jump is less alarming than it looks. First, loan volume grew fast. Second, since Q2 2025 Borrow loans have stayed on Block's own balance sheet, and accounting rules then require it to book expected losses "upfront at origination." Losses therefore rise in step with new lending, before any of those loans go bad. Management says "underlying loan loss rates and portfolio credit performance remained stable." The letter says year-over-year growth in losses should "moderate through the remainder of 2026."
The 10-Q's own aging table is less reassuring on one point. For consumer loans held on the balance sheet ($3.58 billion at amortized cost), loans 60 or more days past due were $145.1 million, or 4.1% of the book, at June 30, 2026, up from $78.6 million (2.5%) at December 31, 2025. Loans at least one day late rose from 11.7% to 14.0%. This compares two different points in the year rather than the same quarter a year apart, and the product mix changed (the letter notes a shift toward Borrow's six-week loan). Even so, it's the first thing to check in the Q3 filing.
Costs: layoff savings are showing up
In February 2026 Block cut more than 40% of its workforce. Restructuring charges were $495.0 million in the first half, almost all in Q1. The 10-Q says the plan is now complete and expects $800–900 million of annual net cost savings, part of which will be reinvested. Q2 shows the savings starting:
Product development expense fell 16% to $608.7 million. Personnel costs were down $146.4 million, partly offset by $86.8 million more in cloud computing fees.
Sales and marketing rose 21% to $665.0 million, driven by Cash App peer-to-peer processing costs, advertising and partnership fees.
General and administrative expense rose 84% to $825.9 million: the $294.9 million legal and regulatory accrual increase plus $52.5 million of lease and equipment impairments. According to the letter, G&A grew 4% on a non-GAAP basis.
The legal backdrop, from Note 16 of the 10-Q: the SEC closed its inquiry in March 2026 without recommending enforcement. A multi-state attorney-general matter over Cash App complaint handling settled in July for an immaterial amount. The DOJ inquiry is still open. Block has accrued $526 million for it, disputes the DOJ's methodology, and warns that the final cost could be "in excess of the amount accrued."
First half of 2026
Metric
H1 2026
H1 2025
Change
Total net revenue
$12,674.5M
$11,826.3M
+7%
Gross profit
$6,075.3M
$4,826.1M
+26%
Operating income
$274.9M
$813.6M
−66%
Adjusted operating income
$1,591.5M
$1,015.8M
+57%
Net income (loss) attributable to common stockholders
−$220.2M
$728.3M
n/m
Diluted EPS
−$0.37
$1.17
n/m
The first-half net loss reflects $495.0 million of restructuring, $548.7 million of higher legal and regulatory accruals and a $261.3 million bitcoin remeasurement loss.
Balance sheet and capital returns
Block ended June with $8.8 billion of available liquidity: $7.9 billion in cash and marketable debt securities plus a $900 million undrawn credit line. It repaid $1.6 billion of maturing 2026 notes during the quarter. Net interest expense more than doubled to $55.7 million, mostly because of the 2030 and 2033 senior notes issued in Q3 2025. Block has bought back $700.9 million of stock so far in 2026, and $4.4 billion of its $9 billion authorization has been used.
Guidance and outlook
According to the shareholder letter, Block raised its full-year 2026 guidance (the letter doesn't restate the previous numbers):
Guidance
Q3 2026
Full-year 2026
Gross profit
$3.13B (+18%)
$12.51B (+21%)
Adjusted operating income
$875M (28% of gross profit)
$3.47B (28% of gross profit, +67%)
Adjusted diluted EPS
$1.02 (+89%)
$4.02 (+70%)
The Q3 gross profit guide of $3.13 billion is slightly below Q2's actual $3.17 billion, and growth is expected to slow from 25% to 18%. Q2 included the one-time tariff reimbursement, which explains part of the gap. The letter does not say how much of the slowdown comes from each segment. Our inference is that Cash App's growth rate should ease as it laps last year's rapid Borrow expansion; the letter doesn't state this.
Our read: the core business is earning more on a leaner cost base. Gross profit grew 25% while product development spending fell, and adjusted operating income reached 27% of gross profit. GAAP results will stay noisy until the DOJ matter is resolved and while bitcoin prices swing. The real risk is credit quality. Cash App's growth now depends heavily on lending to consumers, and delinquencies rose on the balance-sheet consumer loan book in the first half. If loss provisions keep outpacing gross profit growth in Q3, contrary to management's expectation that they will moderate, the growth will be worth less than the headline suggests.
Source: Block, Inc. Form 10-Q for the quarter ended June 30, 2026 (filed August 5, 2026). Cash App user, inflow and origination metrics, Square US/international GPV detail and guidance are from Block's Q2 2026 shareholder letter (Form 8-K Exhibit 99.1, filed August 5, 2026).