Shares in Block (ASX:XYZ) closed 26.74% lower at A$67.50 on Friday, while the company’s US-listed stock (NYSE:XYZ) was down 20.89% at US$46.82 in afternoon trading—marking one of the steepest single-day declines in the company’s history.
The selloff followed a disappointing Q1 earnings report and a slew of analyst downgrades, centred on slowing growth in Block’s flagship product, Cash App. Despite the launch of features like Afterpay on its Cash Card, Cash App’s monthly active users flatlined at 57 million, and inflows rose just 8%—a worrying result during what is typically a strong tax refund season.
“We weren’t focused enough on network growth and density,” CEO Jack Dorsey admitted on the earnings call, adding that engagement via services like banking and lending depends on first expanding the peer-to-peer base.
Missed targets and reduced guidance
Block missed Wall Street expectations on revenue, gross profit, and gross payment volume. Adjusted EPS came in at US$0.56—well below the consensus of US$0.97. Revenue fell 3% year-on-year to US$5.77bn, weighed down by weaker Bitcoin-related growth and lower-than-expected discretionary spending in areas like media and travel.
Gross profit rose 9% to US$2.29bn but fell short of the expected US$2.32bn. Cash App gross profit was up 10% to US$1.38bn, below the US$1.42bn estimate, while Square’s gross profit rose 9% to US$898m. Gross payment volume came in at US$54.1bn, missing forecasts of US$58bn.
Block slashed its 2025 gross profit guidance to US$9.96bn, representing 12% year-on-year growth, down from the previous 15%. CFO Amrita Ahuja attributed the cut to a changing macroeconomic backdrop and shifting consumer behaviour.
Analyst downgrades and red flags
Wells Fargo, Seaport, BMO, and Benchmark all downgraded the stock, citing concerns over stalled user growth, weak consumer demand, and the risks of deeper involvement in consumer lending.
Benchmark described the stagnation in monthly actives as “even more concerning than users’ reduced spending,” while Seaport questioned whether Jack Dorsey was still the right leader for the business. Morgan Stanley and Bank of America maintained more optimistic views, suggesting the selloff may present a buying opportunity.
Strategic focus: lending, not spending
Block’s turnaround now hinges on lending. With FDIC approval, its Cash App Borrow product—offering small, short-term loans—is expanding rapidly. Block expects the product to double the number of eligible users and improve margins by bringing servicing in-house. Marketing spend will jump 50% in Q2 to drive reacceleration in the back half of the year.
Still, some analysts remain unconvinced. “We are not sufficiently confident in the likelihood of such a rebound,” Benchmark wrote, while William Blair warned the company remains a “show-me story.”
Regulatory overhang and competitive pressure
Adding to the pressure, Block recently agreed to pay US$40m to New York’s financial regulator over anti-money-laundering failures, following an earlier US$80m settlement with other states over similar allegations.
Meanwhile, competitor PayPal reported 20% revenue growth for its Venmo app in Q1, highlighting a divergence in strategy. While Block is doubling down on banking and lending, Venmo is gaining ground by embedding itself deeper into e-commerce and checkout flows.
