Block, Inc.

Block, Inc. (NYSE: XYZ) operates Square's merchant payments and business tools and Cash App's consumer financial services. Its products include payments, cards, transfers, lending, Afterpay buy now, pay later and bitcoin services. Gross profit is a useful operating measure because bitcoin customer purchases create substantial revenue with a much smaller contribution to profit.

Growth and the profit comparison

Cash App's gross profit grew 27% to $2.070 billion and Square's grew 14% to $1.157 billion. Adjusted operating profit retains ordinary stock compensation and depreciation, while removing specified contingencies, restructuring, acquired-intangible amortization and other items. Its margin is measured against gross profit.

The current quarter removes $435.0 million of contingencies, restructuring and other charges, versus $20.8 million. The separate restructuring stock-compensation adjustment is $12.7 million. Block's earlier workforce plan concluded in Q2; the mixed adjustment is broader than that plan.

The proposed DOJ resolution

In October, Block reached an agreement in principle with the DOJ for a three-year deferred prosecution agreement over an alleged failure to maintain an effective anti-money laundering program. Final terms and court approval remain outstanding.

The expected gross monetary component is approximately $964 million, with credits for prior regulatory resolutions reducing the expected net payment to approximately $764 million. Block accrued $764 million as of September 30, up from the $526 million estimate disclosed in June. Aggregate legal contingencies across matters were $980.6 million, versus $674.6 million in June and $173.0 million at year-end.

June's filing had already disclosed DOJ negotiations. November adds the agreement in principle and quantified expected terms. Separately, a proposed shareholder-derivative resolution would bring a $150 million payment from defendants' insurers to Block, less court-awarded legal fees, subject to court approval.

What changed in the forecasts

August called for $875 million of Q3 adjusted operating profit. Actual profit exceeded that target by $47.7 million. The annual target increased by $49 million, to $3.519 billion. Our original-document comparison finds that the quarter's beat matches about 97% of that annual increase.

Annual gross-profit guidance rises to $12.626 billion from $12.510 billion, and adjusted diluted EPS guidance rises to $4.15 from $4.02. For 2027, the updated preliminary outlook calls for at least 15% gross-profit growth and $4.575 billion of adjusted operating income, approximately 30% growth.

Lending, cash and funding

Transaction, loan and consumer-receivable losses increased 66% to $601.7 million. Block attributes the increase to lending growth and product mix. It says Cash App Consumer Lending's variable profit margin was in line with a year earlier. That measure deducts processing and risk losses but excludes financing costs.

Quarterly GAAP operating cash was $1.016 billion, versus $1.451 billion. The broader non-GAAP cash-flow measure, which includes lending investment and warehouse funding flows and reverses specified payment-settlement movements, was $668 million versus $239 million.

Nine-month GAAP operating cash was $3.002 billion versus $1.959 billion.

Cash and equivalents were $7.859 billion. Separate customer funds of $5.357 billion are excluded from corporate liquidity. Notes carrying amounts were $5.723 billion, with $1.544 billion of asset-backed warehouse funding and $381.4 million of brokered bank certificates of deposit separately reported.

Block repaid $1 billion of senior notes and $575 million of convertible notes year to date. Repurchase cash of $700.9 million was spent in the first half, with none in Q3. Read the report on the profit upgrade and DOJ accrual for our latest comparison.