Block’s Square unit stands to gain most from Dorsey’s AI pivot, analysts say

Block Inc., the digital payments company behind Square and Cash App, reported “impressive” fourth-quarter earnings and forward guidance, though most of the headlines have focused on the company’s pivot towards artificial intelligence tools.

Block (XYZ) on Thursday afternoon reported operating income of $485 million, while adjusted operating income grew to $588 million. Net income attributable to common stockholders was $116 million, and adjusted EBITDA was $930 million. The firm raised its gross profit guidance to $12.2 billion for 2026, which would be up 18% year over year.

Block also bought an additional 103 bitcoin and now holds 8,883 BTC, worth around $577 million at current prices, giving it the fourteenth-largest corporate bitcoin treasury.

“At least as important,” William Blair equity analysts Andrew Jeffrey and Adib Choudhury wrote in a note to clients, “Block announced that it is reducing headcount by more than 40% as it moves to an intelligence-centric model. The company is the first fintech we cover to reassess the fundamental nature of its workforce and how it will compete and drive ROIC.”

Block is reducing its staff from over 10,000 people to just under 6,000, which CEO Jack Dorsey said is a move to become “smaller”, “flatter,” and AI-first. In the immediate aftermath, it was noted that Block more than tripled its headcount from 3,900 to 12,500 between December 2019 and December 2022, during the pandemic.

“Yes, we over-hired during COVID because I incorrectly built 2 separate company structures (Square and Cash App) rather than 1, which we corrected mid 2024,” Dorsey said in a post on X. “But this misses all the complexity we took on through lending, banking, and BNPL. and that we’re now targeting $2M+ gross profit per person, 4x our pre-covid efficiency, which stayed flat at ~$500k from 2019 until 2024.”

Breaking down Cash App and Square

Cash App’s financial services gross profit reached $865 million, well ahead of William Blair’s $770 million estimate. Analysts are bullish on the structural growth of short-term consumer liquidity products and say Cash App is positioned to capitalize on shortcomings in traditional banktech, products, and value.

Notably, William Blair analysts said Square could be the business where AI has the greatest impact, given its combination of self-onboarding and robust business planning and operational technology.

“We anticipate that Square will increasingly automate customer functionality, allowing merchants to build their own bespoke AI solutions,” analsys wrote. “While competitors have spoken about similar capabilities, we think Square is well ahead.”

Even in the “competitive” U.S. market, Square’s year-to-date GPV growth grew to 7.5%, which was 50 basis points faster than the fourth quarter. Analysts said new products — especially those aimed at restaurants — helped deliver the strongest quarter for new volume in nearly five years, with this metric rising 29%. Management also noted that year-to-date payment volume is up 12%, marking a two-point acceleration from the previous period.

William Blair reiterated an “outperform” rating and $67 price target on XYZ shares.

Block’s stock surged more than 22% in Thursday’s after-hours session. Shares traded around $62.34 at publication, good for a 14% gain. The stock is down over 70% from COVID-era highs.