Block, Inc. (XYZ) Q2 2026 Earnings Report, Transcript and Summary

Thank you all for joining today's call. We have Jack and Amrita with us today, along with Owen Jennings, our Business Lead and Thomas Templeton, Hardware Lead for Block. Today's discussion includes forward-looking statements regarding our strategy, guidance and long-term goals. Actual results may differ materially due to risks and uncertainties described in materials filed and furnished with the SEC and should not be considered an indication of future performance. These statements speak only as of today, and we undertake no obligation to update them, except as required by law. Reconciliations of any non-GAAP financial measures that we discuss to the most directly comparable GAAP measures are available in our shareholder letter. Further, any discussion of our lending and banking products refer to products offered through Square Financial Services or our bank partners. Before turning the call over to Jack, I wanted to note that we're trying something new this quarter. In addition to taking questions on the call, we've sourced questions directly from shareholders on X. Throughout the call, I will ask questions directly of Jack, Amrita, Owen and Thomas based on topics our shareholders asked us to explore on our earnings call. With that, over to you, Jack.

Thank you all for joining us. We had a strong second quarter, and we're raising our guidance for the year based on the strength of our execution. My letter this quarter focuses on our capabilities and how we build. Intelligence tools are making it easier to build all the software we need. What's harder is knowing what to build, owning the capabilities behind it, and connecting those capabilities in ways that create value for customers. That's been our focus from the beginning, and it's why our network gets stronger with every seller and every customer who joins Cash App. There's more detail in my letter, and I hope you get a chance to read through it. With that, I'll turn it over to Amrita.

Thanks, Jack. We outperformed our guidance and achieved record profitability in the second quarter. A few of the highlights: We grew gross profit 25% year-over-year while delivering an all-time high 27% adjusted operating income margin and growing adjusted diluted EPS 65% year-over-year. Square gross profit and GPV both grew 13% year-over-year in the second quarter, with U.S. GPV growth accelerating to our strongest growth rate since the second quarter of 2023. We continued to grow our field sales motion, and we now have more than 200 active ISO partners helping drive over 150% quarter-over-quarter growth in the number of new sellers joining Square from the ISO channel. We drove strong gross profit growth across commerce enablement and financial solutions and we continue to expect gross profit to grow roughly in line with GPV in the second half of the year. Cash App gross profit grew 31% year-over-year in the second quarter. Monthly transacting actives grew 3% year-over-year in June, and we continue to expect low single-digit actives growth in 2026 as we execute on our network growth strategies. Cash App Commerce Enablement volume grew 17%, and Cash App Consumer Lending origination volume grew 59%, reflecting our focus on driving deeper engagement. We continued to ship innovative new products in the second quarter, including Cash App Tags and Cash App Mobile. And we brought Afterpay Pre-Purchase on Cash App Card to general availability. We achieved record profitability this quarter while continuing to invest in the long-term growth of our business. We expanded go-to-market investment in the second quarter across Square and Cash App, and we continued to drive product velocity through our investments in AI, most notably in the public launch of Buzz, our agentic collaboration platform in July. We're raising our 2026 guidance across gross profit, adjusted operating income, and adjusted diluted EPS, flowing through the Q2 outperformance and raising our expectations for the second half of the year. For the full year, we now expect gross profit of $12.51 billion, up 21% year-over-year, adjusted operating income of $3.47 billion or a 28% margin, and adjusted diluted EPS growth of 70% year-over-year. For the third quarter, we expect year-over-year gross profit growth of 18%, adjusted operating income margin of 28%, and year-over-year adjusted diluted EPS growth of 89%. We expect third quarter interest expense of $50 million to $55 million, full year interest expense of $200 million to $210 million and a mid-20% non-GAAP effective tax rate in the third quarter and for the full year. As we look to the second half of 2026, we have several initiatives that we can invest in to sustain attractive long-term growth. In Square, we've proven strong ROIs for new go-to-market motions and have further opportunities to invest across self-onboard, field sales and ISOs. In Cash App, we have numerous products that we expect to continue to grow, including Cash App Tags and Afterpay Pre-Purchase. Neighborhoods, our program to connect our 2 ecosystems, has demonstrated strong product market fit and we expect to lean into investments to scale this differentiated network faster in the second half of the year. AI is helping us deliver more value to more customers. We plan to continue to invest in our AI infrastructure, including Buzz, to drive further velocity gains. The breadth of high ROI growth opportunities we have is significant and we plan to increase the magnitude of our investment if we see the right opportunities to deploy profit upside. Our increased guidance reflects the strength of our first-half execution and the momentum we're carrying into the second half of 2026. Nearly 6 months after we reorganized Block to make intelligence the center of the company, we're moving faster to deliver value to customers and are executing on our long-term growth initiatives, all while delivering meaningful margin expansion and profitable growth. With that, I'd like to open up the call to Q&A.

[Operator Instructions] Our first question comes from the line of Tien-Tsin Huang from JPMorgan.

Great results here. For Jack, I was hoping like last quarter, to maybe just to get a progress report 6 months into the reorg. I know I asked you last quarter. I just want to get an update here. What have you learned about the incremental AI investment and talent you need to scale this model across Square and Cash App? And I know you've talked about streaming intelligence a bunch in a lot of different places. I'm curious if you're on track with that and what proof points you called out to say if you're on track or not on track with...

Yes. Thanks, Tien-Tsin. I would say we're definitely on track. The biggest proof point is our shipping velocity. The team -- we have a very small team on a product like Buzz, which is not just something that we launch internally, but we're using internally as well. We're using it internally to develop. We're using it internally to collaborate, and we think there's a very, very long range -- long runway for a product like this. But it's really something that's foundational, and the only reason we could get it out so quickly with such richness is because of all the work that has compounded over the past 2 years. We were the first to release coding harness to the world months before Claude Code. And we've been building this discipline and intelligence within the company ever since then. And it's allowed us to do things that other companies just haven't been able to do with the organizational structure, including having a more and more cohesive context and memory for the entire company, which I think was, is probably the greatest manifestation of for us, but also for other companies as we look to build around this product as well. I think we're well along the path of implementing these tools to help our organization move faster. And now it's a function of making sure that, that same sort of magic we can deliver to all of our Cash App customers and sellers as well. And I think sellers are some of the most important and probably the most relevant in this next one because they're also looking for help with AI. And I think we're one of the few that can really make it simple enough that people can use it and not have to think about it, and it actually gives them time back instead of -- as a burden of learning.

We'll take our next question from a shareholder on X. And Jack, this one is for you. It's a 2-parter on both Buzz and open source. So how does Block plan to monetize its open source efforts such as Buzz and Goose and talk more broadly about open source strategy. Does open sourcing some of our AI initiatives limit how much they benefit Block because they're public by definition?

It doesn't limit it. I think it gives us a lot more information. It gives us a lot more people who can actually contribute to the code. We're already seeing ideas in the ecosystem and the community that we can integrate within Buzz proper. The reason we built Buzz, as I answered in the last question is to make ourselves more efficient and to remove our single points of failure on vendors that just haven't met the agentic age in the way that we like, in the way that we need. And also how we know our customers, specifically our sellers, will want to operate their businesses, operate their teams and build for themselves and alongside us. So there's a huge menu of options that we can go down to monetize Buzz. We do intend to do so. But we don't want to custom fit one too early without having a lot more information. We are in a fortunate position where we can experiment with a number of models and then choose the right one that's going to, like, align all of our incentives with our customers. We've talked with very small businesses in that regard, and we've talked with some of the largest enterprises we can imagine as well. And we think there's something meaningful there. We do intend on the road map to offer full Git hosting and code repositories. We're going to have a hosted option for teams that don't want to run infrastructure that's live today. We think there's a lot we can do on token efficiency. We're already model agnostic, but much more to do there. And then as I said in one of my posts about Buzz, agents that can transact feels like a natural place that we can explore but there's something that will fit sellers. There's something that will fit a larger enterprise. And, of course, we're building this for ourselves to make us a lot more efficient and better.

Our next question comes from the line of Jason Kupferberg from Wells Fargo.

So just looking at the numbers here, I mean, for the past 4 or 5 quarters, you've beaten your quarterly guidance, not just for AOI, but really for gross profit as well. And this quarter, you're raising the full year outlook for both metrics by more than the Q2 beat, which is obviously great to see. So just as investors contemplate the second half outlook, would it be fair to assume that some of the conservatism we've seen in recent quarters has been factored in? And just any color on how to think about gross profit growth at the segment level over the next 2 quarters would be great to help tune our models. I know that the Square comps get a bit easier and Cash Apps obviously get harder, but any color there would be great.

Jason, thanks for the question. Let me first start by talking about the numbers and some of what we're seeing in real time across the business. And then talk about what we're seeing in each of our ecosystems and kind of the longer-term opportunities to compound growth in the back half of the year and heading into '27. First, on the numbers, obviously, a very strong quarter for us in the second quarter, 25% gross profit growth, 65% adjusted diluted EPS growth on a year-over-year basis. What was encouraging for me to see was how broad-based the strength was. And we feel really good about the momentum that we've got as we head into the back half as a result. If you look at Cash App, we were able to grow actives year-over-year and inflows per active year-over-year at a 9% growth rate. And with that performance really flowing through numerous products from commerce to banking to lending, from a Square perspective, we accelerated growth on a global GPV basis, on a U.S. GPV basis, and obviously, on a gross profit basis with some of the strongest growth rates we have seen in the U.S. since the first half of 2023 in 3 years, whether you're looking at U.S. food and beverage GPV or more broadly U.S. GPV and continued strength in the other target verticals for us with larger sellers and the market growth over 20% and international up 25% on a constant currency basis. So that's sort of a bit of a look at the strength and what drove the strength in Q2, again, very broad-based. And similarly, when we look at the third quarter, what we're seeing so far is consistent strong performance at the data points that we track with Square GPV growth in July, consistent with the strength that we saw in the second quarter and continued healthy inflows per active and monetization rates and risk loss rates across our Cash App business. So then you carry through the run rates that we're seeing where that gets you is the 18% gross profit growth in Q3 with continued margin expansion. And exiting the year in Q4 in that gross profit growth range of sort of that mid-teens growth rate, which is consistent with what we've been sharing for some time now and since our Investor Day guidance in last November, even as obviously, as you noted, we have -- we reached some of the tougher comps for a product like Cash App Borrow, which was scaling dramatically in the back half of last year. And as that growth normalizes as we look to the back half of this year. So coming now to some of the key drivers across the ecosystems. For Square, we'd expect to accelerate gross profit growth in the back half of this year. And that's on the back of both strong GPV growth as we compound the benefits of not only stronger product velocity, but also our ramping distribution channels. And also on the back of expanding our pricing and packaging initiatives that we rolled out towards the end of last year. From a Cash App perspective, as we look to the back half of this year, as I noted earlier, we'd expect actives growth in sort of the low single-digit percentage range and we believe we have far more room to continue to drive deeper engagement across commerce and lending as well. From a consumer lending origination volume perspective, we do expect to see normalization in the back half, but we believe we've built a much broader platform here from a lending infrastructure perspective that should be a driver of growth in multiple ways beyond Borrow, too, as we look to the back half and to the longer term. And then finally, just as we're talking about guidance, of course, we think continuously about efficiency and profitable growth. And as we look at how we've operated post the changes earlier this year, nearly 6 months in, we have built increasing conviction on our ability to shift our operating rhythms as an intelligence company with AI central to all of our workflows and that, that way of working ultimately drives improved efficiency over time and greater leverage to our business over time, which then, of course, gives us the opportunity to invest where we see strong returns. As I noted, in my intro remarks, go-to-market, Neighborhoods, AI, these are opportunities for us to lean in where we see strong returns and as we build that room for ourselves in the back half of this year and into next year.

Our next question comes from the line of Will Nance from Goldman Sachs.

I thought I'd take advantage of Thomas being on the call here because memory costs and hardware have been very top of mind for a lot of investors. And probably more relevant as the volume growth and new customer acquisition and seller keeps accelerating. So can you talk about the hardware and pricing environment that you all are seeing? How is it impacting the business? And could you help us sort of frame the range of outcomes as we think about hardware costs on the business, your access to hardware and talk a little bit about how Block's hardware strategy may differ from competition?

This is Thomas. Yes, thanks for the question. This is definitely top of mind, especially memory. Typically, when we talk about hardware as a differentiator most often, it's in the context of our new products, right? Like in the very beginning, I've been able to come up with the Square original card reader, setting the bar for what point of sale could be with Square Register and most recently with tags creating magical payment wands. And while hardware expertise definitely allows us to differentiate on the product side, and I'm really excited about the new products we have in the pipeline, the hardware is much more than that. And one area that I'm particularly proud of that we don't often discuss is our supply chain and operations team. Over the years, we built deep expertise and gone deep in the supply chain. Most companies have a relationship with our supplier, but we're different in that and we go deeper, and we have relationships with our supplier's suppliers. And for key and core technologies, we go down to the supplier, supplier, supplier. And not only does this allow us to build best-in-class products, but it also enables us to manage supply in a very differentiated way. Thinking back to COVID, everything was out of stock. It's hard to find toilet paper. And one thing that I'm proud of is that we are the only company in our space never to go on back order. Fast-forward to today, hardware costs, specifically memory, are top of mind for everybody. But because it goes so deep in the supply chain, and we have really strong relationships with key suppliers, we actually identified this constraint coming middle of last year. And so since then, for the last year plus, both our engineering and operations team have been working to mitigate these. And this is why, unlike many companies, you haven't heard us talking about supply constraints or cost. Now I do want to caveat that what's happening across every industry is unprecedented, and I think we've heard that our friends down in Cupertino called this a 100-year flood. And while I haven't been here 100 years, in my almost 30-plus years in this industry, I've never seen anything like this. So we can't say that we'll never be impacted, and we do expect our costs to go up over time, just like everybody else. But we have a really good handle on the trajectory of costs and supply dynamics, and we feel that we can manage this accordingly.

Our next question comes from the line of Darrin Peller from Wolfe Research.

Look, it was great to see the acceleration in GPV to 13% global and 10% in the U.S. Can you just touch on some of the key drivers? I mean, we know NVA was converting well, and I think it was up 17% last year. So just how is NVA trending now? Where are you on your sales, building ISO efforts and partnerships? And then just as attached to that, it was also nice to see the spread between gross profit and GPV narrow even without the tariff refund dynamic. Do you still expect that growth rate between GP and GPV and Square to grow in line with each other in the second half?

Darrin, thanks for the question. Yes, so let's unpack the momentum we're seeing with GPV. I think, first, fundamentally, it all goes back to the compounding benefits of our progress against our product strategy and shipping more products at pace and are expanding our distribution channels from a go-to-market perspective. And what we're seeing is that those efforts are really resonating with our sellers and with new sellers as well. From a product perspective, we launched a number of different products that really resonate for food and beverage sellers, things like drive-thru for QSRs and dozens of new features across the board. From a go-to-market perspective, we saw the fastest pace of self-onboard NVA, fastest pace of growth since Q2 of 2021 actually which is really encouraging for us to see in addition to ramping channels from a field sales perspective, from an ISO perspective, from a partnership perspective. And all of that leads to this acceleration that we've seen that's, I think, particularly notable in the U.S. but broad-based as well with our strongest U.S. GPV growth rate since 3 years since Q2 '23. And international performance also coming in strong, even with some of the FX headwinds at 25% constant currency. I particularly call out the strategic verticals that we've been targeting with global food and beverage GPV up 20% year-over-year and the strongest U.S. F&B growth we've seen since Q1 '23, and mid-markets also continue to be our fastest ramping segment also with growth over 20%. And as I noted earlier, a lot of that strength that we saw in Q2 carrying forward into July. On the gross profit point, yes, we were excited to see growth roughly in line and accelerating growth from a gross profit perspective. but roughly in line with GPV growth. I think fundamentally, what underpins that gross profit growth is not only the strong sort of engine underneath it with compounding these gains in GPV but things like continued software adoption growth and momentum in Financial Solutions, driven by products like Square Loans, where we still have tremendous room for continued growth. Products like Cash App Card -- or sorry, Square Card or credit card that we're ramping within our Square ecosystem as well. So the broader suite of software and banking features continue to resonate with the existing sellers and new sellers alike. We did have, in the quarter, a tariff reimbursement benefit of about 2 points. That roughly offset a network remediation comparison from Q2 '25. So those 2 sort of, if you will, onetime elements roughly offset each other by about 2 points this quarter. And we continue to expect Square gross profit in GPV to grow roughly in line with each other as we look at the back half of the year.

Our next question comes from the line of Adam Frisch from Evercore.

The motion on Square is pretty simple in terms of better product with expanded distribution but for Cash App, what do you see the confidence as you lap the huge Borrow growth this year that you can continue to drive outsized gross profit growth in the next couple of years? We like to say it's more people using more products more frequently, but what's the playbook here for Cash App growth? And then if I could just ask on the loss side, what was it in the quarter? Was it still around where it was previously? And how do you expect that to trend?

Thanks, Adam. Happy to take this question. I'll give some context on kind of the durable growth of Cash App overall first, and then I can touch on the loss rate question. I think even though cash has evolved massively over the past decade plus, I think our core approach to growth hasn't changed that much. And I think that's largely because the -- just the addressable market is so massive. We see over 100 million modern earners in the U.S. And we think that's going to be like the fastest-growing demographic over the next 5 to 10 years. I think still with our existing customer base, we still have massive room to deepen engagement. Obviously, Cash App Card attach rate is pretty high, but there's still a number of customers who are still pure peer only. And then increasingly, we're seeing with products like Neighborhoods, teens and families, tags, this is giving us more of a right to win upmarket and actually expanding the addressable market. So our approach has remained the same, which is really just focusing on the ecosystem. And I think this is unique relative to some of the other players in consumer fintech, where top line is coming from 1 or 2 different sources. We think of the cash ecosystem in 4 parts. There's our network-based products, our banking and financial services products, our commerce solutions and then Bitcoin, of course. And I think we have massive runway across the board. So on the network side, we're continuing to invest in network health and core peer-to-peer. Neighborhoods, I think, is set to have a massive impact on Cash App going forward and then continuing to push on our managed accounts U13 product as well as teens and families more broadly. On the banking side, you still have a lot of room to go with Cash App Green and also new products that we're calling internally like these essentials. So things like launching Cash App Phone plans and then continuing to twist knobs and tune dials on the Borrow side and the retro side. For commerce, some really exciting things related to the card. So Afterpay on Cash Card Pre-Purchase just became generally available a few weeks ago. And then obviously, the tags launch, we've had a few viral moments but that's a massive platform for us and continuing to push on distribution with Cash App Pay as well as Afterpay some large merchants we've signed recently. On the Bitcoin side, our pricing decisions, deliberate pricing decisions have actually been a headwind for us this year. But that was a deliberate move to make sure that we're the simplest and cheapest Bitcoin exchange out there. And I think that's proven really successful in terms of relative share gains versus others. All of that is like the core ecosystem of Cash App. And then you can layer on some of the newer bets like how we're monetizing Cash App score, same thing for Moneybot, new things that we're working on that are not public yet. And I think all of these pieces are going to flow through the inflows framework pretty differently. Some of them will hit actives, some of them will hit inflows per actives, some of them will hit monetization rate. From an actives perspective, I think the biggest drivers in the coming months are really Neighborhoods and our families, teens and families products. On the engagement driver side and how we think about growing inflows, I think it's really our focus on the modern earner and spending tools. For what it's worth, Cash Card just turned 10 years old a few weeks ago, which is super exciting. So a decade old, and we're still running GPV growth at more than 20% year-over-year, fourth largest debit program in the U.S. So overall, the way I feel is we have the most expansive product portfolio that we've ever had. And our job is to bring all the different pieces of this ecosystem together in the back half of this year as we head into 2027 and ensure we can maintain those strong durable growth rates over time. And that's despite lapping the kind of meteoric growth in borrow. And I think we have a strong track record of doing this over the past decade plus. Amrita, do you want to just touch on the loss rates piece?

Sure. I presume those -- that's a question on Cash App Borrow loss rates, which continued to be healthy. We look at cohort level loss rates, as you know, and as borrower cohorts season, we generally see that repayment behavior improves and loss rates decline. That's just based on our underwriting and the rich first-party data that we have that feed into our models. More broadly, I would say, based on our consumer lending origination volume forecast. And as I noted earlier, the normalization of the growth rates and the maturation of the borrower cohorts, we'd expect to see year-over-year growth on transaction loan and consumer receivable losses to moderate as well through the remainder of '26.

Our next question comes from the line of Tim Chiodo from UBS.

Great. I want to shift gears a little bit. So a little bit of a unsung hero, if you will, with the SFS part in the shareholder letter. So 2 things that could help margins and maybe free cash flow. But you mentioned that SFS will start to take deposits, which could help with some of the funding for some of the loan products. And then also that SFS is also serving as effectively the acquiring sponsor bank, and it could start to support both Square and Cash App, which would effectively remove some costs. And I was hoping you could talk a little bit about SFS role across those 2 use cases.

Tim, yes, look, we think of capabilities that we're building here around banking with SFS are incredibly powerful, and we're really just at the beginning in terms of this journey that we're on. When I sort of step back and think about the strategic elements that SFS provides to us, I think there's 3 primary benefits. First, SFS gives us greater optionality when it comes to how we bring our products to market, whether through partners or through SFS that ultimately provides us with greater resilience and redundancy. Secondly, it enables us to serve more customers and frankly, expand our products often at better economics. You've obviously seen how that's flowing through from a Borrow perspective, being able to bring Borrow nationwide and improve from a variable profit perspective. Over this past year, such that it's a much more meaningful incremental growth opportunity for us for that product and potentially for future products down the road. And then third, it gives us a direct connection to our regulators, which ultimately helps us build upon trust and get great feedback along the way that as we're expanding new products over time. In terms of where we're entering with this next phase of growth for we are expanding beyond lending. And I think there's kind of two important milestones as I look at where we are and where we're about to head that I'm pretty excited about. First, deposit taking. As you noted, we are expanding our capabilities there. So sellers maintaining at least $10,000 in Square savings are now eligible to earn 3.5% APY. That's 8x the national average, which attracts obviously sellers bringing more of their business to Block. It deepens our relationship, expands retention possibility, and expands our deposit base further. So as we grow balances, we can ultimately build a stable base here that's relatively low cost deposits that then helps us fund future lending products at a lower cost of capital. And so, near term, we're going to -- we continue to externalize those lending originations through warehouse facilities and other funding sources. But over time, you can expect deposits through SFS to become a much bigger part of how we fund those lending originations, and it's far more efficient from a capital and returns perspective. And then secondly, as you noted, we are now building, acquiring capabilities into SFS. And in June, we had a new milestone for SFS as we processed our first Square acquiring transactions. Over time, we can gradually kind of migrate more of those acquiring transactions into both Square and Cash App. But that is a multiyear endeavor as we bring more of that processing infrastructure in-house with, again, the primary benefit to us being increased resilience and redundancy. So all of that to say, Tim, we agree with you. We're super excited about SFS and the opportunity to expand far beyond this first chapter of lending as we look at deposits and acquiring next and the much longer road map beyond that.

We'll shift to our next question from shareholder on X. And this is a couple of questions that we've amalgamated, but this is over to you, Owen. What updates can you share on neighborhoods, including a status update on the broader rollout of the product?

Sure. Thanks, Matt. I think at this point, we're extremely confident that we've found product market fit with neighborhoods, and now we're scaling incredibly quickly. So annualized seller GPV on the platform crossed the $1 billion threshold in June, which is up 220% year-over-year. And then new sellers that were onboarding on to neighborhoods was 8x in July, what it was in March. And then the great part from a product perspective is as we've ramped, we've seen really, really strong and consistent data. So spend from followers reaches about 10% of a seller's GPV in 3 quarters on average. It's like a really meaningful share of GPV. And then we're seeing really strong conversion rates just across every funnel that we're tracking, whether it's buyer enrollments per location or sign up versus neighborhood impressions or claims per location, the list goes on. So we feel really good about the product. And now in the coming weeks and months, we're focused on just massively accelerating the distribution and the go-to-market on the seller side. We're confident in the performance. I think the auto enrollment motion that we talked about last earnings is working really well. And then, of course, there's an incredibly strong correlation between the number of sellers who are on the Neighborhoods platform and then the number of buyers who are engaging via Cash App. On the product side, a few additional things that we're focused on as well. We are testing a motion that's aimed at increasing density. So this is a combination of auto enrollment, plus also kind of dedicated outreach and in-person time from our account management team, which has been really successful with more upmarket, multi location, complex sellers. Also, it's been interesting, just kind of understanding how critical it is for the employees at a given Square seller to get bought in and fully educated on the program. And so we've started experimenting with various incentive programs to kind of get to a world where everyone who's working at a Square seller where Neighborhood is turned on, becomes an advocate of the Neighborhoods program and ultimately using Cash App. We're also going to close out the work where we're making Neighborhoods work for every hardware product, and we'll be launching a tab at the top level in Cash App that shows on kind of like a map-view geographic basis, all the merchants that you can follow and order ahead and engage with. So feeling really, really excited about neighborhoods. To me, my honest reflection is it feels like the early days of peer-to-peer where we have this proprietary onboarding funnel. We're seeing the numbers starting to inflect in a meaningful way. It's pretty clear that this is going to reach massive scale. And then ahead of us, we have a huge opportunity to drive deeper engagement and deeper monetization.

Our next question comes from the line of James Friedman from Susquehanna.

Thomas, another hardware-related question. Would love to hear how Cash App Tags -- cash tags is doing, for example, does it lead to increased engagement or changes in ticket size? What sort of cohorts are embracing it? Any perspective on cash tags would be helpful.

Yes. Thanks for the question. We're super excited about tags. We believe we created the next new viral hardware product. Typically, when you're developing any product, you're excited in the development process. But when I first got a prototype of the wand, and I took it to a seller for the first time and just seeing the reaction, the reaction of the cashier and the people online, cashier actually pull over another cashier to show it to him. It's pretty clear we're on to something. It reminds me in a lot of ways of early Square days where the first time you swipe your card on a phone and signed your name with your finger and got an e-mail receipt, it's pretty magical, and this feels in a lot of ways very similar. Now I'll get into some of the details of your question. But first, I wanted to level set a little bit on why and how we're doing tags. As Owen mentioned, Cash App Card launched 10 years ago. And when we launched it, we took a pretty different approach and that was around customization. We offer lots of different colors, lots of different materials. We have a glow-in-the-dark card. We have a tortoise card. And then -- and customers can personalize, they can write on it and we have stamps and you can really make these one-on-one and our customers love it, especially younger audiences. 1 in 5 teens have a Cash App Card today. But the biggest problem with the card form factor, and then I see this. When I take my Cash App Card out and I have a tortoise card, people comment on it. They ask me where I got it all the time. But the problem is these cards are stuck buried in your wallet, 99% of the time. And so what we wanted to do is we wanted to take the best parts of our Cash App Card and just take it to the next level. And so we did as we developed tags. And tags, it's a module that has an NFC chip and antenna and some other things, but it's fully sealed, waterproof. We put -- you can put it through the washer and dryer hundreds of times. It has no battery. And the great thing is with this module, you can put it into pretty much anything. And once you put it into something that thing turns immediately into a Cash App payment device. So we're pretty excited about that. Earlier in the summer, we launched 3 form factors. We launched our wand, mini card and our heart. And the reception, I mean, exceeded expectations we sold out much quicker than we thought. And then the second wand drop sold out in just over 30 minutes. And the really exciting thing is we did this all with 0 marketing. This was all viral. And today, we have over 3 million people who have asked to be notified for the next drop. So what's next? So right now, we're ramping production of those 3 models that we just -- that we announced and in the coming weeks, we're going to make that more generally available. And then later this year and early next year, we have lots of new tags coming, some fun new colorways of existing SKUs, but also some different form factors. We're going to be making more key chains with some other pretty interesting form factors and materials we're playing with that I'm really, really excited about. But not just first-party products, one of the things we're also doing is we're working on collabs and partnerships. And what's exciting about the partnership space is it allows us to reach other demographics that already had a relationship with a given brand, right? And to your point, like we can expand demographics through partnerships really well. So again, I'm really, really excited about the reception so far of tags. And I'd just say like if you don't have one yet, I recommend getting a wand and when -- I mean, you need to see it and feel it to really understand. And when you pay for it for the first time, you see other reactions and then I think you'll get what we're on to.

I would just add on top of this and broaden it a little bit. Like I think tags is obviously an incredible and super innovative product. And we were able to get it to market like incredibly quickly, especially for a hardware product. But I think that motion is just reflective of how development at Block has changed, especially over the past 6 to 12 months. I think the flow-through from AI tools is just making it so that we can ship higher-quality features and products to our customers at a higher clip. Those things used to conceptually be at odds with each other, and it's just not the case anymore, given how the AI tools are flowing through. At this point, a Block AI is involved in basically every single production code change or production code review. Code changes per engineer is up 150% since the start of the year. Square, just for reference, we shipped 130 features in the first half of 2026. That's up more than 3x relative to the first half of 2025. And I think all of that is because of the foundation and the investment in AI tools over the past 3 years, whether it's Goose or contributing to the MCP or its Buzz or it's everything else that we've built internally. And so now I think that you're really seeing that start to flow through in terms of shipping things to customers. Tags is a great example, as Thomas went through. I think the acceleration in neighborhoods is a great example, Square credit card just reached over $1 billion in annualized spend. Managerbot and Moneybot are GA, Afterpay on Cash App Card is GA, stablecoins on Cash App are GA. The list goes on. So I think just fundamentally, that this is a narrative around high quality, high velocity that we've been talking about for the past 2 to 4 quarters. We're just -- we're seeing it come to life in Q2.

Our next question comes from the line of Nik Cremo from Barclays.

I wanted to ask on Block's AI cost strategy with your model agnostic approach as you lean deeper into AI as an organization given token costs are becoming an important topic? And separately, it would be helpful to hear how you're thinking about AI monetization over the near to medium term with Managerbot and Moneybot.

Nik, thanks for the question. Maybe I'll start off on the cost strategy. And Owen, you can chime in on Managerbot and Moneybot monetization. First, I'd say, look, we see the headlines. It's obviously a major one, and we think around cost for AI and we think relative to the industry, we feel we're pretty well positioned here for a couple of reasons, including one that you noted around the model agnostic builds for Goose. I'd say more broadly, our budgets obviously are going up. But we're focused on a strategy that ensures returns from those budgets. And I think what you just heard from Owen on product velocity that we are seeing tremendous speed and quality come through in terms of development capabilities using these tools and even back of house in terms of how we run the company and our workflows now from an intelligence perspective. But the strategy from a cost perspective for us starts with intelligently routing our workloads, being efficient in how we think about compute and leveraging multiple models, including open source models where appropriate. And then, obviously, the technology is continuously advancing. So we evolve our strategy as we see those advancements as rapidly as week-to-week or month-to-month. We don't think the right answer is to constrain developer velocity or productivity using these tools. We think the answer, as I noted, is really just to be thoughtful and intentional about how we deploy the tools. And we know that there's -- it's an evolving paradigm and it's one where we feel we've built a strong foundation and have identified a number of ways to improve efficiency over time, but there's more work to do for us and for many others. Maybe I'll just quickly note, I think the 2 core capabilities that we're building that are truly differentiated here, especially as we think about the efficiency, returns and cost component of our AI approach. So first, as you noted, Nik, Goose is model agnostic. And we think this is a component that we foresaw some years ago, that's really important. It means that we're not locked into a single provider's capabilities or pricing structure. And that's true for anyone, obviously, who would use Goose. We are seeing sometimes the leading open source models are better today than what existed 6 months ago. And therefore, we have the ability to leverage whatever is the frontier model from an intelligence or cost perspective based on what we've built. You don't need the most leading edge model now for the vast majority of model of knowledge work. And so we can then route based on what we're seeing as the advancements play out. Then secondarily, what I'd say is that from an engineering perspective, we've built an internal evaluation system that is scoring each model on a number of metrics from quality to cost based on our real production data. And so that means that we're continuously evaluating on a task level basis, all of the new models as they're released and as pricing evolves. And of course, we're all seeing extremely powerful models now become lower priced, which then gives us the opportunity to build the right efficiency approach into each of our workflows where we can see a lot of our work get done with older models, which are increasingly powerful. Turn it to you, Owen.

Yes. Happy to touch on monetization for our AI products. I think it's pretty clear that we have an opportunity to monetize Managerbot, Moneybot and Buzz. I think Jack talked about on the Buzz side and how we've had conversations with sellers and businesses of all sizes from the small businesses that you square all the way up to some of the biggest companies in the world, and I think there's a really clear willingness to pay there. I think on the Managerbot side, in particular, it's a pretty interesting opportunity for us. We've been testing an updated version of Managerbot that's capable of like some of the most complex and also some of the most time consuming tasks that our sellers are faced with. I've talked to a number of them, and there's a really, really clear willingness to pay, especially if you think about some of these tasks like scheduling or managing inventory or what have you. I think that this could take a bunch of different shapes over time. You could think about building Managerbot into one of our SaaS tiers, you can think about charging directly for Managerbot, you could think about more like usage-based pricing, especially for enterprise sellers who are more used to that sort of model. Right now, we're focused on the quality of Managerbot. We're focused on distribution and we're focused on making it as useful as possible as a partner for these businesses. I think the one other thing that I would add is that I wouldn't just think about the first order monetization for something like Managerbot I think fundamentally, like when sellers win, we win, it's good for them, it's good for Block. It's good for the economy, frankly. And so if we can help a seller make like 10% better decisions or increase the chances that they don't go out of business by 10%, that's a win-win. And obviously, from a business perspective, that ends up flowing through same-store growth, retention and ultimately, GPV overall.

We'll take our final question that was submitted via X. So this one is for you, Jack. Block's mission is centered around increasing access to the economy. How are you balancing investment and deepening that core mission with newer AI initiatives like Buzz?

I think the only way we've been able to like really serve more of the economy and increasing access is through the technologies behind what you know as AI today. Like we started the company with a pretty rich machine learning and deep learning discipline because we needed to understand and model risk and fraud. And that went on to us using the same tools for lending. And these technologies have always been a pretty deep part of our DNA and something that we have benefited from at a company level, but also like as we pass this on to our customers. I think Buzz takes it to a different level. I've been talking with a lot of sellers recently. And one of the things that is common amongst all of them is that they all talk to their staff, they're all frustrated with the tools that they have available to them. They're all interested in building. They are using AI tools today and looking for something that's just built in batteries included and they can use right away to build up their business, grow their sales, help manage their employees, help manage the operations. And that's a perfect place for Buzz to fit in, but we think there's so much more. And a lot of what building comes down to is really building for the economy. And I think that hits our purpose directly. And I believe we're going to be on the frontier of this and we're super excited about what people are doing with it already.

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