Block lifts profit outlook on Cash App strength, reaches preliminary DOJ settlement

Block, the company led by Jack Dorsey, has raised its full-year gross profit outlook due to a strong performance in its Cash App unit. This boost in earnings helped the firm's quarterly results. Shares of Block increased by 7% in extended trading.

The US economy expanded at its fastest pace in a year during the third quarter, which helped consumers maintain strong spending despite higher oil prices caused by the Iran conflict. This consumer demand positively impacted financial firms like Block.

Cash App, Block's consumer-focused financial platform, saw a 27% surge in gross profit in the third quarter compared to a year ago. Gross profit at its Square merchant business grew by 14%.

Block has diversified its revenue streams through Cash App's growing banking and lending products, such as Cash App Card and Borrow. Chief Financial Officer Amrita Ahuja noted that strong repayment rates on Borrow indicate consumers are managing their finances well. However, this diversification has also increased credit losses, with losses on transaction, loan, and consumer receivables rising by 65.6% to $601.7 million in the third quarter.

The company now expects gross profit of $12.63 billion for 2026, representing a 22% growth compared to its earlier forecast of $12.51 billion. Block also anticipates $3.32 billion in gross profit for the fourth quarter and $14.52 billion for 2027, indicating a 15% growth. The firm expects AI investments to drive sustained growth, with executive officer and Head of Business Owen Jennings revealing that the fourth quarter marks the first time the company will generate revenue directly from AI tools.

In a separate development, Block reached an agreement in principle with the US Department of Justice to defer for three years a charge that it failed to maintain an effective anti-money laundering program, violating the Bank Secrecy Act. This resolution, expected to result in a net payment of approximately $764 million after credits, removes some uncertainty related to the probe but remains subject to a final agreement and court approval. Block warned that the ultimate terms could lead to losses exceeding the amount already accrued.