10-Q: Block Reports Strong Q3 Gross Profit, Cash App Borrow Surges

Block, Inc. announced an 18% year-over-year gross profit increase to $2.7 billion in Q3 2025, driven by robust growth in Cash App Borrow and Square's integrated payments.

Summary

• Gross profit for the third quarter of 2025 increased by 18% year-over-year to $2.7 billion.
• Cash App generated $1.6 billion in gross profit, up 24% year-over-year, primarily driven by growth in Cash App Borrow.
• Square generated $1.0 billion in gross profit, up 9% year-over-year, fueled by strength in software and integrated payments and banking products.
• Total net revenue for Q3 2025 was $6.1 billion, a 2% increase year-over-year; excluding bitcoin revenue, total net revenue increased by 17%.
• Net income attributable to common stockholders for Q3 2025 was $461.5 million, up from $283.8 million in Q3 2024.
• Diluted net income per share was $0.74 for Q3 2025, compared to $0.45 for Q3 2024.
• Adjusted EBITDA reached $832.7 million in Q3 2025, an increase from $807.5 million in Q3 2024.
• Available liquidity stood at $10.5 billion as of September 30, 2025, including $9.7 billion in cash, cash equivalents, restricted cash, and marketable debt securities, plus an undrawn $775.0 million revolving credit facility.
• The company repurchased $1.5 billion of its Class A common stock during the nine months ended September 30, 2025, with $1.1 billion remaining authorized under the program.
• Issued $2.2 billion in aggregate principal amount of senior unsecured notes in Q3 2025, consisting of $1.2 billion due 2030 and $1.0 billion due 2033.
• Beginning in the second quarter of 2025, the majority of newly originated customer loan products are classified as loans held for investment on the balance sheet.

Sentiment

Score: 7

Explanation: The company demonstrated strong gross profit and net income growth, particularly in its core Cash App and Square segments, excluding the volatile bitcoin revenue. The focus on cost efficiency and strategic investments in lending products are positive. However, the significant increase in loan losses and the ongoing regulatory scrutiny, especially regarding tax and customer complaints, introduce notable risks and increased expenses. The overall financial health appears solid, but these challenges warrant careful monitoring.

Positives

• Gross profit increased by a strong 18% year-over-year to $2.7 billion in Q3 2025.
• Cash App segment gross profit surged 24% year-over-year to $1.6 billion, primarily driven by Cash App Borrow.
• Square segment gross profit grew 9% year-over-year to $1.0 billion, demonstrating strength in software and integrated payments/banking products.
• Net income attributable to common stockholders significantly increased to $461.5 million in Q3 2025 from $283.8 million in Q3 2024.
• Diluted EPS rose to $0.74 in Q3 2025 from $0.45 in Q3 2024.
• Adjusted EBITDA increased to $832.7 million in Q3 2025 from $807.5 million in Q3 2024.
• Excluding bitcoin revenue, total net revenue increased by a robust 17% year-over-year in Q3 2025.
• Gross Payment Volume (GPV) increased by 11% in Q3 2025, with Square GPV up 12%.
• Subscription and services-based revenue grew 23% year-over-year in Q3 2025, driven by Cash App's financial service products and the BNPL platform.
• Cash App Borrow revenue increased by $198.8 million in Q3 2025, reflecting successful product expansion.
• Achieved the employee cap of 12,000 in 2024 and plans to continue operating below this cap, indicating effective cost efficiency measures.
• Received an investment grade rating (BBB-) by Fitch Ratings, Inc. in Q2 2025, which was affirmed in Q3 2025.
• Recognized a remeasurement gain on bitcoin investment of $59.6 million in Q3 2025.

Negatives

• Total net revenue growth was only 2% year-over-year for Q3 2025, and decreased 1% for the nine months ended September 30, 2025, primarily due to a significant decline in Bitcoin revenue.
• Bitcoin revenue decreased by $462.2 million (19%) in Q3 2025 and $1.4 billion (17%) for the nine months ended September 30, 2025, driven by a decrease in trading volume.
• Transaction, loan, and consumer receivable losses increased significantly by 89% to $363.5 million in Q3 2025 and 51% to $827.2 million for the nine months ended September 30, 2025, primarily due to growth in loan volumes.
• Interest expense (income), net, increased substantially to $34.7 million in Q3 2025 from $13.8 million in Q3 2024, and to $75.6 million for the nine months ended September 30, 2025, from an income of ($6.8 million) in 2024.
• Available liquidity decreased by $234.2 million from December 31, 2024, primarily due to a $1.0 billion cash payment for the settlement of 2025 Convertible Notes and $1.5 billion in share repurchases.
• Transaction-based costs exceeded GPV growth during Q3 2025 due to an increase in higher-cost credit card transactions.
• Incurred $10.0 million in severance and other expenses in Q3 2025 related to cost efficiency efforts.

Risks

• The ability to retain existing sellers and customers, attract new ones, and increase sales to both new and existing sellers and customers.
• Investments in the business and the ability to maintain profitability, as the company intends to continue investing and has generated significant net losses in the past.
• The ability to maintain, protect, and enhance its brands (Square, Cash App, TIDAL, Afterpay) against service failures, data misuse, fraud, compliance issues, and negative publicity.
• Efforts to expand the product portfolio and market reach, including through acquisitions, may not succeed and could reduce revenue growth and profitability.
• The long-term success depends on the ability to develop products and services to address the rapidly evolving market for payments and financial services, including adapting to technological changes like AI.
• Substantial and increasingly intense competition in markets and industry from established players, neobanks, and other fintech companies, which may lead to pricing pressures and market share erosion.
• Developments in the cryptocurrency market, including regulatory actions, market demand fluctuations, price volatility, and security compromises, subject the company to additional risks.
• The development and use of AI in products may result in reputational and competitive harm, and could adversely impact the business due to inaccurate, biased, or unexpected outputs, or evolving legal frameworks.
• Acquisitions, strategic investments, new businesses, joint ventures, divestitures, and other transactions could fail to achieve strategic objectives, disrupt ongoing operations, or result in operating difficulties, liabilities, and expenses.
• Operating or expanding the business globally subjects the company to new challenges and risks, including difficulty in attracting customers, competition, and compliance with diverse international laws and customs.
• Risks related to the banking ecosystem, including through Square Financial Services, bank partnerships, and FDIC and other regulatory obligations, such as potential FDIC disagreement on deposit insurance coverage or higher assessments.
• Loan products (Square Loans, Cash App Borrow, BNPL) are subject to risks related to availability of capital and general macroeconomic conditions, and increase exposure to customer defaults, especially with unsecured obligations.
• The TIDAL business is dependent on various rights holders and subject to music industry risks, including complex royalty payment determinations.
• Real or perceived improper or unauthorized use of, disclosure of, or access to data could harm the company's reputation as a trusted brand and lead to significant financial losses and legal liabilities.
• Real or perceived security breaches or incidents or human error in administering software, hardware, and systems could materially and adversely affect the business.
• Systems failures, interruptions, delays in service, catastrophic events, and resulting interruptions in the availability of products or services could harm the business and brand, and subject the company to substantial liability.
• The theft, loss, or destruction of private keys required to access bitcoin held on behalf of the company and other parties may be irreversible, and any failure to safeguard such bitcoin could materially and adversely affect the business.
• Risk management efforts may not be effective in detecting and preventing fraud, bad actors, or illegitimate transactions, which could expose the company to losses and liability.
• Exposure to risks associated with chargebacks and refunds in connection with payment card fraud or relating to goods/services provided by sellers, especially during economic downturns or merchant insolvency.
• Dependence on payment card networks and acquiring processors, and changes to relationships or operating rules could harm the business.
• Reliance on third parties and their systems for a variety of services, including the processing of transaction data and settlement of funds, and their failure to perform adequately could materially and adversely affect the business.
• Dependence on key management and experienced employees, and any failure to attract, motivate, and retain employees could harm the ability to maintain and grow the business, especially with the employee cap and restructurings.
• Failure to continue to maintain and improve operational, financial, and other internal controls and systems to manage growth effectively could harm the business.
• Many key components in hardware products are procured from a single or limited number of suppliers, leading to risks of shortage, price increases, tariffs, changes, delay, or discontinuation.
• Services must integrate with a variety of operating systems; inability to ensure interoperability could materially and adversely affect the business.
• A deterioration of general macroeconomic conditions, including inflation, interest rate increases, and potential recession, could materially and adversely affect business and financial results.
• Inability to secure financing on favorable terms, or at all, to meet future capital needs, and existing credit agreements and Senior Notes contain covenants that impact business operations.
• Servicing Notes may require a significant amount of cash, and the company may not have sufficient cash or the ability to raise funds necessary to settle conversions, repay at maturity, or repurchase Notes.
• Counterparty risk with respect to convertible note hedge transactions.
• Bitcoin investment is subject to volatile market prices and potential adverse accounting rule changes.
• Exposure to fluctuations in foreign currency exchange rates.
• Exposure to greater-than-anticipated tax liabilities, including challenges from tax authorities (e.g., San Francisco gross receipts tax on bitcoin sales) and changes in tax laws (e.g., OBBB Act, Pillar Two, Inflation Reduction Act).
• The dual class structure of common stock has the effect of concentrating voting control within stockholders who held stock prior to the initial public offering.
• Volatility of the market price of Class A common stock, which could lead to loss of investment.
• The dual-listing of Class A common stock on the NYSE and CDIs on the ASX may result in price variations between the exchanges.
• The convertible note hedge and warrant transactions may affect the value of Class A common stock.
• Anti-takeover provisions contained in the certificate of incorporation, bylaws, and provisions of Delaware law could impair a takeover attempt.
• Bylaws provide that the Delaware Court of Chancery or another state court or federal court located within the State of Delaware will be the exclusive forum for substantially all disputes, and federal district courts for Securities Act claims, which could limit stockholders' ability to choose the judicial forum.

Future Outlook

The company expects to continue its cost efficiency efforts and anticipates realizing benefits from these actions in future periods. It plans to operate below its employee cap of 12,000 through performance management, centralization of teams, and prioritization of scope. Management believes that existing available funds are sufficient to meet liquidity needs for the foreseeable future, including the share repurchase program. The company expects to hold its bitcoin investments for the long-term but will continue to reassess them relative to its balance sheet. A material reduction in expected cash taxes paid in fiscal year 2025 is anticipated due to the One Big Beautiful Bill Act, though no material impact to current year effective tax rates for income taxes is expected. The company does not expect the adoption of new accounting standards (ASU 2025-06 and ASU 2025-05) to have a material impact on its financial statements. The Tax Collector may challenge the company's gross receipts tax position going forward, and the company estimates potential losses up to $114 million for fiscal years 2020-2024 related to this dispute.

Management Comments

• "We sharpened our focus on our organizational structure and expenditures with a view to identifying areas where we can be more cost efficient as we focus on disciplined growth."
• "We announced we would implement an absolute cap of 12,000 on the number of employees we have at our company, which we achieved in 2024, and plan to continue to operate below this cap through a combination of performance management, centralization of teams and functions to reduce duplication, and prioritization of our scope."
• "We continue to realize benefits related to our focus on disciplined growth and cost efficiencies, and we expect to continue to benefit from these actions in future periods."
• "The goal of the [share repurchase] program is to return capital to shareholders."
• "We believe cryptocurrency is an instrument of economic empowerment that aligns with our corporate purpose."
• "We expect to hold these [bitcoin] investments for the long-term but will continue to reassess our bitcoin investment relative to our balance sheet."
• "We believe that our existing cash and cash equivalents, investment in marketable debt securities, and availability under our line of credit will be sufficient to meet our working capital needs, including any expenditures related to strategic transactions and investment commitments that we may from time to time enter into, short-term debt repayments, shares repurchased through our share repurchase program, and planned capital expenditures for at least the next 12 months."
• "We strongly disagree with the Tax Collector's assessment [on San Francisco gross receipts tax] and plan to vigorously pursue all available remedies."
• "Management believes that an adequate provision has been made for any adjustments that may result from tax examinations."

Industry Context

Block operates in the dynamic fintech industry, encompassing payments, financial services, and cryptocurrency. The strong growth in Cash App Borrow and the BNPL platform reflects increasing consumer adoption of alternative credit solutions, a key trend in consumer finance. Square's continued growth in integrated payments and banking products highlights the ongoing digitalization and demand for comprehensive tools among small businesses. The decline in Bitcoin revenue, despite a remeasurement gain, underscores the inherent volatility and fluctuating demand within the cryptocurrency market, which remains a significant, albeit low-margin, component of the company's business. The company's strategic focus on cost efficiency and employee caps aligns with a broader industry trend among technology companies to optimize operations and improve profitability after periods of rapid expansion. The notable increase in transaction, loan, and consumer receivable losses, particularly from Cash App Borrow, suggests potential credit quality challenges or aggressive lending expansion in the consumer finance sector, which could be exacerbated by prevailing macroeconomic conditions. Furthermore, the company's ongoing engagement with various regulatory bodies (SEC, DOJ, state Attorneys General, CFPB, and the San Francisco Tax Collector) reflects the heightened scrutiny faced by large fintech players across diverse operational areas, including consumer protection, tax compliance, and crypto asset management.

Management Changes

Corporate Governance

Legal Proceedings

• **State Attorneys General Inquiry (Cash App customer complaints)**: The company received subpoenas and was presented with investigation results in June 2024, followed by potential resolution terms in December 2024. The company is engaging in conversations to resolve the matter, but the outcome is uncertain and could be material. A loss is probable, but the amount or range of loss cannot be estimated at this time.
• **SEC and DOJ Inquiries (Short seller report)**: The company received inquiries from the SEC and DOJ shortly after a short seller report in March 2023, with a follow-on inquiry from the SEC in July 2024. These inquiries primarily relate to allegations in the report, compliance and risk practices, and related disclosures. The company is cooperating, but the outcome is uncertain and could have a material adverse effect.
• **San Francisco Gross Receipts Tax Audit**: The Tax Collector finalized an audit for fiscal years 2020, 2021, and 2022 in June 2024, assessing incremental taxes on bitcoin sales. The company strongly disagrees and paid $71.4 million in January 2025 to initiate the dispute process. An audit for fiscal years 2023 and 2024 was initiated in May 2025, resulting in a $42.7 million assessment paid in October 2025. The company estimates potential aggregate losses up to $114 million for 2020-2024 but has not recorded a liability as a loss is not probable.
• **CFPB Consent Order**: The company entered into a Consent Order in January 2025 related to certain customer service and dispute resolutions matters. Noncompliance with the order may result in further exposure to CFPB action.
• **General Legal Matters**: The company is subject to various other legal matters, investigations, subpoenas, inquiries, audits, claims, lawsuits, and disputes in the ordinary course of business. While a reasonable range of exposure cannot be estimated for these other matters, the company does not believe their final disposition will have a material adverse effect on its results of operations, financial position, or liquidity, though resolution could be material for any particular period.

Related Party Transactions

• The company has a lease agreement for office space in St. Louis, Missouri, entered in July 2019, with an affiliate of Mr. Jim McKelvey, a co-founder and current member of its board of directors. As of September 30, 2025, the company recorded right-of-use assets of $9.9 million and associated lease liabilities of $15.0 million related to this lease arrangement. The lease has a term of 15.5 years with options to extend, and an option to terminate on January 1, 2034, subject to penalties.

Stakeholder Impact

• **Shareholders**: The share repurchase program aims to return capital, but the dual-class stock structure concentrates voting power. The market price of Class A common stock is volatile, and potential equity raises could cause dilution. Ongoing legal and regulatory matters could impact share price and investor confidence.
• **Employees**: The implemented employee cap of 12,000 and ongoing restructuring efforts, including severance costs, may impact employee morale and retention. Share-based compensation remains a key component of employee incentives.
• **Customers (Sellers & Individuals)**: Growth in Cash App Borrow and Square's integrated payments benefits customers. However, customers face risks from service disruptions, security breaches, fraud, and potential losses from loan products. Regulatory actions (e.g., CFPB, State AGs) directly address customer service and dispute resolution issues.
• **Suppliers/Partners**: The company's dependence on payment card networks, acquiring processors, and other third-party service providers creates operational risks. Shortages or price increases of hardware components could impact product availability and costs.
• **Creditors**: The recent issuance of $2.2 billion in senior notes increases the company's debt obligations. Compliance with debt covenants is crucial, and changes in credit ratings could impact future borrowing costs and access to capital.

Next Steps

• Continue efforts on cost efficiency and disciplined growth, including operating below the employee cap of 12,000.
• Monitor and update estimates for valuation of loans held for sale, allowance for credit losses for loans held for investment, and accrued transaction losses.
• Continue to evaluate the full impact of the One Big Beautiful Bill Act for future years.
• Continue to cooperate with SEC and DOJ inquiries related to the short seller report and compliance practices.
• Vigorously pursue all available remedies regarding the San Francisco gross receipts tax assessment, including the claim for refund for fiscal years 2020, 2021, and 2022, and the request for redetermination for fiscal years 2023 and 2024.
• Continue to monitor the likelihood of recovering deferred tax assets and adjust the valuation allowance as needed.
• Continue to explore other products, models, and structures for product offerings, including with bank partners.
• Continue to develop, improve, and invest in risk management infrastructure, techniques, and processes.
• Regularly review and update policies, controls, and procedures for Cash App Investing's regulatory obligations.
• Continue to monitor performance, capital structure, and results of operations by credit rating agencies.
• Implement ESG commitments, initiatives, and goals, including building a diverse workforce and achieving net zero carbon for operations by 2030.

Key Dates

Recommendation

Block demonstrates strong underlying gross profit growth in its core Cash App and Square segments, indicating healthy business momentum and effective cost management initiatives. The expansion of lending products like Cash App Borrow is a significant growth driver. However, the substantial increase in transaction, loan, and consumer receivable losses, coupled with ongoing and potentially material legal and regulatory challenges (SEC, DOJ, San Francisco tax dispute, CFPB consent order), introduce considerable uncertainty and potential future costs. While the company's liquidity position is strong and share repurchases aim to return capital, these risks warrant a cautious approach. A "Hold" recommendation reflects the balance between solid operational performance and significant, unresolved regulatory and credit quality headwinds.

Keywords

Fintech, Payments, Cash App, Square, BNPL, Bitcoin, Cryptocurrency, Financial Services, Mobile Payments, Digital Wallet, Lending, Small Business, E-commerce, Afterpay, TIDAL, SEC Filing, 10-Q, Earnings, Gross Profit, Revenue, EPS, Adjusted EBITDA, Share Repurchase, Debt Issuance, Risk Management, Corporate Governance