Block slashed 40% of its workforce for AI - and earnings suggest that's paying off

By Emily Bary

'We can ship higher-quality products much, much more quickly,' an executive said in the wake of the company's better-than-expected earnings report

Block topped earnings expectations for the second quarter.

Less than six months after the surprise announcement that it would be laying off more than 40% of its staff as part of a deep embrace of artificial intelligence, Block said its leaner structure is yielding results.

"We can ship higher-quality products much, much more quickly, and that's because of all the innovation that we've been pushing on as it relates to AI," Owen Jennings, the company's business lead, told MarketWatch. He noted that Block (XYZ), which houses Square and Cash App, shipped more features in the first half of 2026 than it did in the same period of 2025.

Executives said the change is having a positive impact on the company's financial results. Block just reported third-quarter gross profit of $3.17 billion, above the $6.47 billion consensus analyst view. Adjusted earnings per share came in at $1.02, ahead of the 87 cents that analysts were forecasting.

Block also raised its full-year expectations, as management now calls for $12.51 billion in gross profit and $4.02 in adjusted earnings per share. The company's prior forecast was for $12.33 billion and $3.85, respectively.

CFO Amrita Ahuja told MarketWatch that the raised outlook encompasses more than just the beat from the latest quarter. "We feel very good about the shift that we've made to become an intelligence-oriented organization," she said.

Within the Square business, the company saw gross payment volume increase 10% to record its strongest growth rate in three years. Gross profit for the unit increased 13% to reach $1.16 billion. Management attributed the momentum to traction with larger merchants and self-onboarded sellers alike.

Block has also worked to make its restaurant-focused offerings more competitive for quick-service vendors. Executives noted increased velocity on product offerings for things like drive-through stations.

As for the Cash App business, gross profit was up 31% to hit $1.97 billion. There were 59 million monthly transacting active users for Cash App in the month of June.

Block is seeing synergies between its various business units, including through Neighborhoods, a loyalty program that gives consumers rewards and helps them find out about new businesses.

"Between the number of sellers who are on the program and the number of consumers who are engaging with the program through Cash App, to me, this feels like the kind of early days of Cash App, where we were scaling peer-to-peer and we had found this proprietary onboarding channel," Jennings said.

The company further noted "viral moments" around Tags, which are Cash App payment products shaped like wands or other fun form factors.

The "rethinking of the traditional card form factor is something that's really going to resonate, particularly with audiences like Cash App," Jennings said. According to the company, 1 in 5 U.S. teens has a Cash App card.

Block shares were down 2% in after-hours trading following the results.

"[It] seems like there's the usual postprint volatility in the stock as of this writing - and perhaps the buy side was expecting to see a stronger print and/or [third-quarter] guidance - but bottom line, purely based on these numbers, we would think that the shares eventually move higher on this beat-and-raise," Seaport Research analyst Jeff Cantwell wrote in a note to clients.

-Emily Bary

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08-05-26 1819ET