Block, Inc. (XYZ) Q3 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 Juan Hernandez, Head of Credit and Underwriting. 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. As we did last quarter, throughout the call, I will ask questions based on topics our shareholders ask us to explore. With that, over to you, Jack.

Thank you all for joining us. We had a strong third quarter, exceeding our guidance and raising our outlook for the year. We had a strong quarter in Cash App, and we continue to accelerate in Square with U.S. GPV growth more than doubling over the past 2 years as we've expanded distribution and accelerated product velocity. In my letter this quarter, I focused on the intelligence capabilities we're building for our customers across Square Kiosk, Squaremates and Moneybot. I also shared more about the path we're going down to make our company an intelligence and how we plan to enable others to do the same. Buzz is an environment for building and collaborating that brings all of our ideas together in one surface. We're now beginning to bring Buzz and the related tools we built for Block to other companies through Builderlab, our new ecosystem. We're excited to share more about Builderlab at our November 10th event, and I hope you'll tune in. We're also building new ways for people to interact with intelligence. We believe voice is the most natural interface to interact with intelligence. And a few weeks ago, we shared Dessa, our full-duplex speech model. It captures the emotion, nuance and natural cadence of conversation. I encourage you all to listen to the samples we shared 2 weeks ago. We're transforming our company from one that creates traditional financial products into one that streams intelligence as people need it. Thank you for your support along the way, and thank you for investing in our future. And with that, I'll turn it over to Amrita.

Thanks, Jack. We delivered another strong quarter, outperforming all our guided metrics. A few of the highlights. Gross profit grew 22% year-over-year to $3.24 billion. Adjusted operating income grew 92% year-over-year to $923 million or a record 29% margin. And adjusted EPS more than doubled, growing 109% year-over-year to $1.13, also a quarterly record for us. Square GPV growth accelerated to 14% year-over-year in the third quarter, our strongest growth rate since the first quarter of 2023. Our go-to-market strategies are working. And through September, we've launched new products and features at a faster pace than we have in the past 2 years combined. We have also ramped investments across each distribution channel this year. Year-to-date through August, self-onboarding new volume added grew at its fastest rate in over a decade. Field sales won upmarket sellers in the U.S. and internationally, and we have more than 400 ISO partners, expanding the number of sellers we can reach. Square gross profit grew 14% year-over-year, in line with GPV growth, driven by volume growth, increased software adoption and Square Loans growth. We expect gross profit to grow roughly in line with GPV in the fourth quarter. Cash App gross profit grew 27% year-over-year in the third quarter. Monthly transacting actives grew 4% year-over-year to 60 million in September with Neighborhoods a key contributor. We have conviction in our actives growth strategies and expect to grow actives by at least low single digits in 2027 with Neighborhoods, Cash App families, product innovation like Tags and go-to-market investments all contributing to our growth expectations. We continue to be focused on deepening engagement as we grow actives. Cash App Commerce Enablement gross profit grew 27% year-over-year, driven by higher buy now, pay later adoption on Cash App Card. Financial Solutions gross profit grew 36% year-over-year on borrower origination growth and strong returns. Cash App consumer lending origination volume grew 40% year-over-year to $19 billion, with Afterpay post-purchase origination volume more than tripling year-over-year and prepurchase origination volume more than tripling quarter-over-quarter. Returns on our lending products continue to be strong in the third quarter. Variable profit margins were consistent with the prior year period, even on a much larger base. In our investor slides this quarter, we shared monthly cohorted returns for mature borrow customers. This is an important metric we use to evaluate our performance. And as you can see, we observed consistent strong returns as we've dramatically grown originations. We also shared target unit economics for Cash App's consumer lending products. While changes to our product mix have driven shifts in aggregate risk loss rates, what we optimize for is variable profit returns and product unit economics. And the products that are scaling originations the fastest and therefore, growing in our mix have the strongest targeted variable profit margins and returns. We delivered record adjusted operating income this quarter while continuing to invest in the long-term growth of our business. Margins expanded more than 10 percentage points year-over-year, and we grew adjusted operating income 92%, even as we leaned into investments across go-to-market, Neighborhoods and AI. Our core go-to-market motions continue to deliver strong ROI across Cash App and Square as we scale investments, and we're excited to keep investing to sustain long-term growth. Annualized GPV of sellers on Neighborhoods increased nearly 5x from June to September, and we expect to continue to grow Neighborhoods further. We're also leaning into investments in AI and expect to generate our first AI revenue in the fourth quarter as we begin to externalize Block's AI capabilities and interfaces across Builderlab and Buzz. We're raising our 2026 guidance across gross profit, adjusted operating income and adjusted diluted EPS, flowing through Q3 outperformance and raising our expectations for the fourth quarter. For the full year, we now expect gross profit of $12.626 billion, up 22% year-over-year, adjusted operating income of $3.519 billion or a 28% margin. We also expect adjusted diluted EPS of $4.15, up 75% year-over-year. For the fourth quarter, we expect year-over-year gross profit growth of over 15%, adjusted operating income margin of 30% and year-over-year adjusted diluted EPS growth of 77%. In past years, we've given some early visibility into our preliminary expectations for the following year on our third quarter earnings call. This year, we wanted to provide deeper insight into our growth and margin expectations for next year. A year ago, we initially guided to achieving Rule of 40 in 2026 with 17% gross profit growth and 23% adjusted operating income margin. Our updated guidance reflects meaningful outperformance compared to those initial expectations, implying Rule of 50 with 22% gross profit growth and 28% adjusted operating income margin. In 2027, we expect to sustain the momentum we've observed in 2026 with at least 15% year-over-year gross profit growth and adjusted operating income margins of 32% or 30% year-over-year adjusted operating income growth. This growth and margin expansion is a strong demonstration of our commitment to delivering durable, profitable growth at scale. As always, we strive to outperform our preliminary growth expectations. In 2026 and 2027, gross profit outlook is 5% ahead of our Investor Day expectations. And our 2026 and 2027 adjusted operating income outlook are both 1 year ahead of schedule compared to our Investor Day expectations. Given the strong incremental margins and high-return investment opportunities we see, we plan to reinvest profit upside in long-term strategic growth initiatives like Neighborhoods and Builderlab, where we -- which we believe will shape Block for the next decade. We'll seek fast feedback loops and scale these new growth vectors with the same discipline and rigor we apply to our core growth investments. We'll share more about our financial expectations for 2027 on our Q4 earnings call in February. Our path forward is clear. We're moving faster, delivering more for our customers and connecting our ecosystems while delivering 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.

Thanks for the preliminary '27 look and some of the new disclosures, Slide 13 is great. So thanks for that. Jack, I wanted to ask you about Builderlab, if you don't mind, just as that new ecosystem, as you called out, sounds really intriguing. Tell us, how should investors think about the size of that opportunity over time? I assume what we see now in terms of what you're externalizing is just a small sample of what's to come. So can you tell us a little bit more about the vision, the product strategy, the target clients, revenue model? Anything else you can share would be great.

Yes. We gave a preview of what this is going to be like at AgentCon, and I would definitely encourage folks to watch Brad's keynote on Buzz, but we have a full event on November 10th to talk about everything Builderlab. And this is a way for us to collect everything that we're doing in the AI tool space into one narrative, one event that we will talk about how everything fits together. But most importantly, to introduce people to Buzz 1.0. And this is a surface that brings everything we've been working on for the past 2 years in the AI tooling space together into one really easy to understand and super powerful interface that we intend to use internally to replace a bunch of third-party vendors. And we also believe it enables other companies of our size, larger than us and also much, much smaller than us to do very similar things. One of the things that's been interesting as I talk with more and more sellers out there is how many of them use WhatsApp or iMessage or e-mail or something that they hate to communicate with their staff. And we've introduced them to some early views of Buzz and how it might integrate with Squaremates, which I talked about in the letter. And they love it because it allows them to communicate and organize and collaborate with their team, but also enables them to build with agents with them as well and build with AI. And you would assume that like a lot of sellers, especially smaller sellers aren't up on this technology, but they all are. They want something that's really easy to use, and they want something that's immediately accessible and Square can deliver that. So what this foundation enables us to do is go from the very smallest of sellers, the smallest of businesses, all the way up to our size and beyond. And we are experimenting with a number of monetization paths, but we do expect to have our first monetization of our AI tools in Q4 of this year. We want to make sure that we're being flexible with how we're putting these things out in the world and how we charge for them because we want to learn on what works. But there's a number that you can imagine that you've seen others, including the labs utilize that we can take on and push out as well. But we're just going to make sure that we're getting all the feedback and learning from it and then locking it in.

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

It's great to see the outlook for '27 with 15% year-over-year gross profit growth even on a tougher comp against a tougher comp year. So maybe, Amrita, if you could just help us with the building blocks there a bit, maybe breaking down as much as you're willing to right now on Cash App versus Square. And then even the margin going up, I think it looks like 400 basis points year-over-year. Help us just understand a little bit more around where the operating leverage is primarily coming from and what parts of the business and the investments you're looking to make as well to offset.

Darrin, yes, happy to unpack our preliminary look of '27 here. And obviously, we'll have a lot more to say as we get into the year next year. First, just taking a step back, what I would say is that we feel a tremendous amount of momentum, as you can see in our results in the back half of this year carrying us into '27. We're outperforming our outlook on a Rule of 40 basis by 10 points. We expect to outperform by about 10 points, 5 points on growth and 5 points on margin in 2026, and exiting the year in that 15% plus range from a gross profit perspective. So as we look to '27, delivering on the growth rates that we set out at Investor Day for 2027 with 15% growth on gross profit, 30% on AOI is a tall order because we're coming off a much larger base in 2026. Along with, as you noted, 3.5 points of margin expansion relative to 2026, a year where we've vastly outperformed our expectations with respect to margin. A lot of this comes down to what we're seeing across our business. First, when we think about gross profit, I'll share with you a little bit about our process. We first estimate our run rates across the core book of business that we have today, our existing products and features. We then layer on top of that the building blocks of growth, which include a probability weighted set or portfolio of new initiatives. And so as we look across each of Square and Cash App, we see a number of things, whether they're newer initiatives that are already out there and beginning to compound and ramp or newer initiatives that we think could continue to drive growth into the future. When you look at Square, we have investments across a number of different distribution channels that are really just beginning to compound. We have product velocity growth, 180 features so far released this year, more than in all of '24 and '25 combined. And then some of our more recent launches like Kiosk and Squaremates, which we believe can drive growth in our priority verticals and really across all sellers into the future. That's part of what gives us the confidence to believe that we're going to accelerate our GPV growth for Square for the third consecutive year in 2027. We're also focused from a gross profit perspective as we look at Square is driving higher attach rates into our SaaS and banking products where we think we still have a lot of room to run. From a Cash App perspective, as we noted earlier, we expect at least low single-digit actives growth. Some of this coming from our Neighborhoods contributions, which we're pretty excited about as we ramp that to thousands of more sellers in the back half of this year and also strong growth in attach across our top verticals within Cash App, commerce enablement and financial solutions. As you saw in our investor slides, we're scaling consumer lending across high targeted returns and have the ability to continue to do that into 2027, along with ramping newer initiatives that are just getting out there now and like Cash App tags or our upmarket strategy, our strategy to go deeper with modern earners that we believe we can do so much more on in 2027. So each of these different pieces going into that sort of probability weighted portfolio of new initiatives that layer on to our existing run rates to believably drive profitable growth into the future. And that's part of what's flowing through to the bottom line, as you noted, with an AOI outlook for '27 that's 30% higher or over $1 billion higher on an absolute basis than our implied Investor Day guide from last year. I think it's maybe notable finally, just to say, as you've heard from us, there are a lot of ramping very nascent initiatives in our portfolio from Cash App Score and being able to externalize it to Builderlab to Squaremates, each of those investments that we'll be leaning into, but our 2027 growth guidance does not rely on those initiatives. We're excited about them and encouraged about the early signs that we see, but -- and we'll be investing into them, but our growth outlook for next year does not rely on those initiatives.

Our next question comes from the line of Dave Koning from Baird.

Nice job. I wanted to talk a little bit or ask about the Square business acceleration and just what you're investing in with new sales reps, ISO relationships. We hear more in the field about you gaining a lot of momentum. Maybe just describe the investments there, if you're going to make more and how that should drive the future.

Sure. Dave. Look, I think '26 has obviously been strong so far. And what's really great to see is the strategy is working across our priority verticals. Each of food and beverage, mid-market and international growing at rates at 20% or higher in terms of the volumes that we see in the third quarter. I think a lot of that, if you unpack it, is a combination of, as you've noted, our go-to-market channels, as well as the product innovation where we're really seeing that, that's resonating with our sellers is taking on more jobs to be done as we roll out more and more features. From a go-to-market perspective, what I'd say is we're pretty excited about the traction that we have year-to-date through August, self-onboard, which has always been a core motion for Square, has seen some of the highest rates of growth that we've seen over the past decade in terms of new volume added. And that's as we're ramping newer channels like the ISO channel, where new sellers joining through our ISO partners grew 90% quarter-over-quarter. This is a channel that's gone from 0 to 400 partners in the past year. And it's still early. It's still a relatively small basis in contribution to the overall pie for Square. And so we think we have more opportunities, particularly to grow that, not only in the U.S., but in markets outside the U.S. And meanwhile, our first-party field sales and enterprise motion continue to drive new customer acquisition in the U.S. and internationally. We have some big name sellers like Tommy's Tavern + Tap and Public House Group in London that we're excited to attract and be a steward that brings in other sellers as well. So continuing to expand that both field sales feet on the street as well as enterprise motion is a core focus for us. Those are some of the key things that I think are driving the acceleration of growth that we saw in the third quarter for both GPV as well as gross profit. That's particularly aided by not only the volume growth, but the higher software adoption that we're seeing and the simplified pricing and packaging motion that we introduced over this past year. Again, early days on some of that. We think there's a lot more room to run. Only 16% of U.S. sellers use monetized software on our platform as of September, a lot more opportunity for us to continue to drive product attach there as we think about gross profit growth into '27.

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

You talked around the overall philosophy centered around returns and variable profit margins on the lending side. Can you talk specifically about how that philosophy informed the change in the duration profile in Cash App Borrow, and we can see from the slides, the 6-week loans are higher, and I know there's a slight negative impact on volume. So when you kind of pull way up, how does that philosophy kind of inform the changes made and how you think about the impact that these changes are having on the outlook for variable profit dollars and originations over the next year?

Will, yes, thanks for the question. Happy to share some thoughts. So the shift that we're seeing, we saw like a large growth in originations and also a large growth in risk loss, these shifts come from deliberate economic decisions, obviously. And I think it's worth talking about it. So we saw a 40% origination growth, and that included this intentional mix shift into higher margin, higher loss products, as you called out. So borrow moved from primarily being 4 weeks with a 5% fee to 6 weeks with a 7.5% fee. We also have been scaling other 6-week products that have a 7.5% fee on Cash App. And so that just gives us a lot more margin to work with. And so to get into the philosophy of like how we think about this, if we have that margin to work with, we have to make like the right risk loss decision. And so you can imagine on one side, we could hold losses constant. We could have made this shift to 6 weeks and held losses constant or you can think alternatively faced with this set of options, how do you grow long-term customer value and maximize responsible credit access. Obviously, we're aiming to do the latter. And there's a lot that goes into how we think about this. So here, maybe talk a little bit about like what is our technical sophistication that goes into this and a little bit of the unique culture, I think, that we have at Block. So first off, I don't think that we have like the typical credit team. I think we have like a really special credit team built around machine learning engineering as a discipline. Machine learning is also my background. I tend to think -- I can't help but think of the business itself as like a learning algorithm where we have an objective function that we're trying to maximize value according to like a definition. I'll get into that in a second. But one of the things that's unique about Block and especially in our credit teams is that our ML engineers are not purely just focused on training models, lobbying them over the fence, et cetera. We're very deeply embedded in the business. We work directly with the product teams. We also work directly with the finance teams in terms of trying to determine, as Amrita was sharing, like what is our optimal definition of value for the business and how do we maximize it. So we're trying to build something that maximizes credit access responsibly for our customers and then also maximizes variable profit returns. And so our ML teams working with our finance and product teams, we do a lot of experimentation. We have very tight feedback loops. We have a great set of proprietary data. We use all of that to run experiments constantly to try to identify what is the efficient frontier, the optimal way that we can trade off between risk loss and growth/credit access. So all these experiments and feedback loops, they really go beyond just developing these models, and they're informing us in real time as we launch each new product and as we think through things like even duration. The goal that we have behind all of this science is can we move the efficient frontier upwards over time. And I think that we've been doing that. So getting back to the economics, we've upgraded our target variable profit margin on borrow from 2% to 2.8%. And I think we have -- as far as I know, our return on capital of 37% target, that's the best that I can think of, of any fintech lender out there. And all the while, we're growing at a really impressive rate where consumer originations grew 45% compound annual growth over the last year with variable profit growing nearly as fast. So I think we have -- it's kind of like a core part of our DNA at Block. And we have a track record of -- we've been doing this for over a decade on the Square Loans side, where over the 10 years -- over the prior 10 years plus, Square Loans have been growing at 27% compound annual growth and each year, still beating its 4% loss target. So we've definitely like kind of built a really strong system around this. Not only that, but like external partners they're interested in applying the same models that we're using, the same data as we've been sharing about Cash Apps for. And I think that this is just creating like a lot of validation that I'm very bullish on it. I am so convinced in the way that we approach risk and underwriting that we're actively trying to build a new credit system in new rails that we want to externalize outside of our company. And we're seeing a lot of great feedback from partners there.

Our next question comes from the line of Dan Dolev from Mizuho.

Congrats on a really, really nice quarter. So I wanted to ask you about the very strong improvement in Cash App MAUs. I mean, very nice to see that. I wanted to know, I mean, you highlighted a little bit in the shareholder letter on the drivers, but maybe can we unpack a little bit more what's going on there and what's driving that, obviously, Neighborhoods and congrats again on really strong results.

Thanks for the question, Dan. I appreciate it. Yes, we're quite pleased with actives growth in Q3. We hit 60 million MAUs in September. That was up about 4% year-over-year. This is roughly the fastest pace that we've seen in year-over-year growth since the middle of 2024, and it was slightly above our internal targets for September. I think the key contributors for September were really Neighborhoods and teens and families in terms of the incremental impact on growth. And now we feel really good about the trajectory going forward. So I think we mentioned we now expect at least low single-digit growth in actives as we head into Q4 and 2027. And of course, we're always striving to do better. I'm always striving to do better. The key drivers as we look ahead are kind of four key areas, I think. One is just ongoing investments in peer-to-peer network enhancements and our go-to-market motion. We've talked about this quite a bit over the past few quarters, and I see this as just an always-on motion for the development teams and the go-to-market teams. I think Neighborhoods is going to be a really meaningful driver and a really meaningful tailwind for us as we continue to scale to more and more sellers. We rolled out Neighborhoods to a cohort of about 30,000 sellers in late August, and that contributed meaningfully to September MAUs. But of course, we serve millions of sellers. So we see a huge opportunity here to continue to scale. And then on the family side, we're continuing with product improvements, go-to-market partnerships and then also leaning into Tags. I think you can actually start to see the impact of the active acceleration playing out in inflows per active, where inflows per active grew at about 6% year-over-year on the quarter. But then if you strip out some of these cohorts that are teens and family-specific or neighborhood specific, inflows per active actually would have run about 2 points faster. And so now from this perspective, I think it's more about an engagement story from my perspective. So for instance, when we look at PBAs, it's pretty clear that PBAs and our focus on primary banking actives is working. Inflows from primary banking actives were up about 23% year-over-year and inflows per active for the PBA cohort was up 8% year-over-year. I have confidence that the strategy and the focus is working, but I also think that we can do more here. So it's both about driving more incremental actives to Cash App overall, but then also converting a higher share of those actives into primary banking actives, and we do continue to be focused there. I expect to grow PBAs sequentially in the last month of Q4, and we continue to see a huge opportunity where we're at a place now where we have 60 million monthly actives. We have about 28 million card actives on a monthly basis. And we're both increasing the top of the funnel and the customers coming to Cash App in the first place, but then also driving Cash Card attach and also driving more folks into that primary banking actives category.

Okay. We'll take our next question directly from a shareholder. This one is for you, Jack. How do you see the competitive environment evolving for Cash App and Square with the proliferation of personal AI agents that are looking to monetize through commerce. How do you think about positioning Cash App and Square to remain differentiated as more companies focus on agentic commerce?

Yes. I think we want to make sure we're meeting our customers where they are consistently. That's always been one of our principles. And there's certainly a lot of folks out there going after the wallet side. I think what Cash App and Square represent is more of all the banking services. For you and if you want to utilize an agent to manage your money or purchase things, you can do so. It's also really important that we recognize use cases that people are doing today and the ones that we think will compound greatly. The one that is really interesting that we can see agents taking a lot of attention on is on the vendor side for Square merchants, being able to handle a bunch of the mundane task of just ordering inventory and ordering the ingredients that you need to run your business, doing it automatically being tied into the inventory system such that they can ask you whether to do it or not and it just handles everything is very real and takes a lot of friction away from our sellers. So certainly, we're very interested in that. But we do think there's opportunity on the consumer side as well. It's still pretty early, but we want to make sure that we have all the primitives and the platform ready. But I think the biggest differentiator is we're not just a wallet, we're the entire bank.

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

I want to talk about the consumer lending origination volumes metric, and I have a question around the growth looking forward. So currently, it's pretty clear that the growth is being a little bit suppressed given the 4- to 6-week transition. It's hiding a little bit of the underlying growth. It appears that there's at least five factors that we can think about for unlocking that growth in 2027. The first is literally the unlock of getting past the 4- to 6-week transition for borrow. The second is the pending resumption of increasing the loan size limits across borrow. The third is the ramping of post-purchase BNPL. The fourth is prepurchase BNPL and then the fifth is, of course, just underlying user growth in general to attach any of these products. I was hoping you could expand upon those, maybe add to the list or elaborate.

Tim, yes, thanks for the question. Great enumeration there. I think this touches also on some of the comments from Will earlier. So yes, the 6-week move, again, like we started that because customers were asking for more time and payment flexibility. And then we found through experimentation like this is a great fit with what our customers are looking for. The margin profile is a lot better. We're also seeing higher customer retention from the 6-week construct. So it's like an important factor there to think about as we talk about growth long term. I think you got the right call-outs on originations, which is as we moved from 4 weeks to 6 weeks, we made the decision to keep the credit limits the same. And I guess like you could probably figure it out easily, which is that if you keep the credit limits the same, you extend the duration, customers are going to borrow less frequently. So we saw actually a 7% quarter-over-quarter decline in originations per customer during the rollout. This was as expected, knowing that we made the decision to keep the limits the same. Again, like this is coming with stronger margins that are supporting the stronger gross profit and variable profit growth. The other thing to call out is just like we're facing really tough year-over-year comps if you look over the past years, just like big, big levers that we've pulled. Q3, we're facing a comparison against shipping the SFS migration of Borrow of last year. And then coming up in Q4 and Q1, we're comparing against the launch of Cash App Green. So to get to your list, yes, I think that you're pretty much on point with a lot of those. That's how I'm thinking about growth. First off, on my mind, yes, we're on the other side of migrating borrow from 4 weeks to 6 weeks. We've already done experiments of like what are some other ways that we can do this to try to optimize for more growth. We're excited to be experimenting with the higher limits. We think that that's definitely like a very strong possible path to go down. Just to give you context, the maximum limit for Borrow right now is only $1,500. In contrast, BNPL, and that's all of our 6-week BNPL products, which have the same duration, same target customers, those have a maximum limit of $3,000. So we're actually launching experiments right now to see how much of that growth can we attain on the Borrow side. And so we're excited to push forward with that. The other thing is, as you said, we're not just talking about borrow. We've been launching other Afterpay products within Cash App. So post-purchase BNPL and Afterpay on Cash App Card are both growing at really, really impressive rates. I think Amrita already shared like the year-over-year and the quarter-over-quarter growth rates. But the other thing to think about is that I think about all the time is like how are we learning as a business like you ship one product. It's very, very hard to ship a consumer lending product. And then shipping a new product, I'm always trying to like beat our record and kind of have like this funny name that is like, hey, look how fast we got to this growth checkpoint. And so here's the checkpoints that I'm looking at today. For post purchase, it's currently operating at 3x the origination volume that borrow was at the same stage of development. And then Afterpay on Cash App Card, which we just launched for the first time to consumers just this year, not too long ago, it's operating at more than 20x as much origination volume as borrow at the same stage of development. So like we're definitely moving up that learning curve. I think a big part of that is also just like the reinvigoration in the last couple of years from like AI just really driving a lot more acceleration, but a lot of it is just expertise of knowing like how are we going to ship this next product. Both of these also, we haven't even started like SFS migration for these products. So we're looking forward to additional expansion that's going to drive a lot of growth on these products. So the other thing is, I think like as we build new products, like we know that we haven't solved for all of our customer needs. People are going to need to borrow in different form factors. There's different segments of customers. We think that the velocity that we're building here is really just going to continue as we launch new products to solve new things. And then I think the other thing to think about is in addition to like all the points that you've made and that I've made also is like this new orthogonal growth vector, as I like to think about it, which is the Cash App score. Like this is like a big shift in how we're thinking about the products where it's not just about, hey, let's launch the next like lending product, but it's like how do we actually ship and monetize the technology layer that underpins all of our lending products. So again, like the Cash App score is our way of extending underwriting as a form of intelligence like to our partners. Just earlier this year, we announced a distribution partnership with Nova Credit, which we're super excited about. We also have a lot of very interested direct partners that are evaluating the Cash App Score through data studies. Like again, like I can't speak more highly about like how I think about the data that we're using versus like the status quo. One of the things that we found by experimenting with our data and looking at historical comparators is that we showed like a potential for up to 30% higher approval for auto loans at a constant loss target compared to like the status quo. So I think there's like tremendous upside. And I think it goes without saying that for customers and what this means for like the Cash App ecosystem, there's also a lot of upside because I think that when customers are able to see that like everyday money movement is going to create more credit opportunities than traditional methods. We think that it's going to drive even more engagement with Cash App. So we're really excited about what's coming in the future.

Our next question comes from the line of Bryan Bergin from TD Cowen.

I was hoping to circle back with a broader question on Neighborhoods. So can you just give us a sense of your early learnings on conversion and retention? As you're thinking ahead to '27, how you may see Neighborhoods contribution to active growth and GPV penetration, curious if you see a kind of a steady build or a sharper ramp forming. And then related to that, just comment on the investment needs to promote Neighborhoods.

Sure. Thanks much, Bryan. I'll set the stage first a little bit on Neighborhoods and then get into some of the specifics. I think overall, I'm incredibly excited about where we are with Neighborhoods. So last quarter, I think I said we believe we found product market fit with Neighborhoods and now it's all about scaling. And that's exactly what we did in Q3. I think we also said we expected the first major business metric or KPI that Neighborhoods would hit was going to be Cash App actives, and that's exactly what we saw in September. So in terms of where we are right now, we auto-enabled a cohort of about 30,000 sellers in late August. And we've now scaled to the point where sellers on the platform represent about $5 billion in annualized GPV. I think Amrita mentioned that was up about 5x relative to June. And then we've also seen consistent metrics in the funnel on the seller side, where for folks who have been on the Neighborhoods platform for more than a year, they're averaging more than 1,000 followers and about 10% of their overall GPV is coming through the Neighborhoods channel. Specifically to your question in terms of driving actives, we saw more than 500,000 Neighborhoods actives in September and roughly half of those were incremental, meaning they didn't otherwise transact in Cash App. And that rate of roughly 50% has been consistent for the past year or really like since the inception of the program. In terms of where we're going from here, I think it's still incredibly early. we think that basically every American is shopping at a Square seller in a given year. And so Neighborhoods is still quite small relative to the millions of sellers that we're serving. I think in terms of product development in the coming months and quarters, we're focused on connecting Neighborhoods more deeply to Square Loyalty and Square Online, making sure it's working great across all hardware form factors and also all verticals. I think in Q4, you should expect even more sellers coming on to the platform. Early in '27, it's probably even more sellers coming on, but then also turning on the Neighborhoods tab or the Neighborhoods map to all Cash App actives within Cash App because we'll kind of have reached the saturation point in terms of Neighborhoods being truly useful across like almost any geo. To get a little bit more specific about impact because I think you're asking about like what's the gross profit impact potential for 2027. It is still early, but I do expect that to the extent we're seeing direct flow-through, it's going to be more on the buyer side than on the seller side in the next couple of quarters. We're still in the process of scaling to more and more sellers, which is then correlated to incremental actives coming into Cash App. I think once you then build that base and you have more and more consumers who are using Neighborhoods, then I think you start getting into the flow-through to things like seller retention or seller win rates for our sales teams or even incremental GPV. In terms of what we're seeing right now, I think it's really clear that Neighborhoods is and will continue to drive outsized growth in terms of actives. And then I think the primary motion that we're focused on is cross-sell, upsell and driving that attach rate. We haven't even started to scratch the surface of what does it look like if you try to introduce Cash App Card and drive card attach, how does that work with the rest of the system? I think there's a pretty clear cross-sell opportunity for some of our additional commerce tools. And that's kind of the whole -- that's been the whole playbook for Cash App since inception, which is you have a proprietary distribution channel, you bring actives in and then you're driving cross-sell, upsell into more valuable, more useful products and you have an ability to monetize there. I think just the last point I would make on funding costs or how we're thinking about the investment. First, I think it's a pretty incredible place to be in where we control all the levers. So we're funding these rewards right now. We control what the reward rate is for the sign-up bonus for the ongoing rewards, and we can kind of make changes based on what we think is going to be the most effective. I do -- I will talk about the potential for sellers to be funding this. But even just right now, even if you just think about block funding these rewards, it's actually an incredibly efficient distribution and acquisition channel for us. I think kind of similar to the early days of peer-to-peer, where the referrals program was doing a lot of the heavy lifting, and that's still true to this day where we have really, really low CACs. There's a world where it could make sense either for part of the program or the entire program just to continue running this in perpetuity. That said, I do think that as you get more and more density on the consumer side, there's more and more followers. Sellers are recognizing the value of this program, and they have the ability to have a proprietary marketing channel to their followers. I think that it's pretty clear that the willingness to pay is there. I think evidence of the tens of thousands of sellers who are paying for Square loyalty right now, which is a roughly similar product. is evidence of that. But we feel like we have maximum flexibility. It's early. And also, we're seeing pretty significant impacts in September. So just really, really excited about the quarters to come and what we're going to continue to invest here meaningfully.

All right. Thanks, Owen. We'll take another question from one of our shareholders directly. Jack, you touched on this a little bit in some prior answers, but it would be great to dive more into our plans to integrate Buzz into the Square ecosystem and talk more broadly about Squaremate's capabilities and what we're building there.

Yes. I mean -- so as we've looked at how we work, it mirrors very closely with how our small sellers work as well. We see a lot of similar patterns as they communicate with their teams. We see similar patterns as they want to introduce AI tools into their flow. They start simply just by asking queries of their data and building charts and asking questions and then get more and more sophisticated with agents taking on actions for them and helping them and their teammates utilize these new technologies. Talk to a number of sellers who have a desperate want and need to share these AI tools with their staff, but just don't have an easy way to do that. And that's what Buzz represents for them. So we do intend to build it as a foundation for Squaremates, and that's what we were calling Managerbot in the recent past. We'll have a lot more to say on that next week at the Builderlab's event and also an upcoming announcement and reintroduction to Managerbot aka Squaremates in the coming weeks as well. So super excited for you all to see that and really excited to get more and more of this out to our sellers.

Our next question comes from the line of Andrew Schmidt from KeyBanc.

I was wondering if you could talk a little bit about AOI growth and how you're thinking about the reinvestment framework. Specifically, I think the 2027 outlook implies mid-50s incremental margins even as you ramp investment in things like Neighborhoods and external AI. Just any color on how you balance upside flow-through against reinvestment or just in general on the investment return framework would be helpful here.

Sure, Andrew. So I think similar to what we said last quarter, there's a set of initiatives that we're investing in that we believe will help us sustain long-term profitable growth. I think of them across five different categories, and maybe I'll speak to each one just briefly in terms of the recent progress we've made and the returns that we're seeing in each of them. First, obviously, go-to-market. I think we've proven some strong ROIs here, not just frankly, in the Square business, but also the Cash App business. We talked earlier about the self-onboard sales and ISO motion within Square. We're seeing 5-quarter paybacks here, and we're hitting or exceeding the thresholds that we've set across each of these channels from an ROI perspective. From a Cash App perspective, from a distribution perspective, we're seeing a 3-quarter payback for marketing and referrals. So these are motions that across sales and marketing that we'll continue to invest in so long as we see those strong returns. Second, I would say our product motion within Square noted a couple of times already on the call that our product innovation momentum is a core part of taking on more jobs to be done for our sellers. And I think some of the more recent examples, as you heard from Jack on Squaremates or more recently, our launch of Kiosk are some very strong examples there that we'll be investing into and making sure we can get them into sellers' hands into the next year. Third, Cash App product evolutions. We've talked about tags and the importance around our commerce initiatives and upmarket and families strategies that product brings, reaching more customers through Cash App en Espanol, the very strong returns that we're seeing for our lending products in Cash App, investing into risk loss, you've heard from Juan on this call, really helps us drive the strong variable profit growth that we've seen and broader ecosystem benefits, too, that those lending products provide us as a lot of those customers get more deeply engaged across the full set of products that we have as we invest in them through our lending products. Fourth, I'd say, Neighborhoods. You just heard a bunch from Owen on that as well. We're seeing strong product market fit. We'll lean in to be able to scale this sort of distribution differentiated network faster. You'll see that through Cash App actives first, and we want to be able to demonstrate value to sellers or prospective sellers into the future as well. And then finally, our AI infrastructure, including our newest ecosystem with Builderlab and with Buzz, which we're just now starting to externalize, which at the very least drive velocity gains internally for us, but potentially externally for other customers, too. As we see continued traction against the milestones that we set for those five investment areas, we would look to redeploy profit upside to drive long-term growth in those areas. A lot of how we can do that is by continuing to seek efficiency opportunities across our fixed cost base and through driving strong incremental margins. A couple of the proof points that we've seen on that with G&A down 21% on a non-GAAP basis. in our more recent quarter is helping us to drive those fixed cost efficiencies. I believe that there are more to be had across our business as we look into next year. And then as you noted, strong incremental margins. We had said at Investor Day, 50% plus by 2028. We'd expect to exceed that in both '26 and '27 in terms of the incremental margins that we've driven as we've reset our cost base. So all of that kind of ladders up, Andrew, to the preliminary '27 profit -- gross profit and profit guidance that we put forward of the at least 15% growth in the 3 to 4 points or so of margin expansion as AOI grows by 30% next year. We're focused on really balancing efficiency while continuing to invest in these strong return areas.

We will now take our last question from the line of Bryan Keane from Citi.

Congrats on the execution. Owen, I wanted to ask you on Cash App gross profit growth going into next year, thinking about the building blocks, it looks like it will be over 15% looking at the guide, but just trying to think about commerce enablement versus financial solutions, the volumes in each and monetization rate maybe for Commerce Enablement.

Sure. Thanks, Bryan. Appreciate it. So I'll take us back to Investor Day to start, we guided to mid- to high teens gross profit growth for Cash App. And the basic kind of growth algorithm that I set out was essentially what we're trying to do is find differentiated ways to reach customers and then just keep on delivering them more and more value. I think tactically, what that looks like is scaling actives, driving deeper engagement. And then as you do that, you're introducing more opportunities for monetization. This has been the basic growth algorithm that we've had on cash since 2013, 2014, and I think it has -- and I think it will continue to create just a diverse range of opportunities for us. It's the same approach that let us scale from something like $20 million in gross profit in 2016 to where we are now at like an $8 billion gross profit run rate, I think. That said, I think it's always the case that we are focused on certain parts of the growth algorithm differently and/or like some areas are performing better than others. If I think about a couple of years ago, I think a lot of the incremental growth was coming from engagement, but we are seeing a decel in actives growth. much different from where we are today. So I'll just talk about the different kind of pieces and where we are today. On the active side, I feel really, really good about both where we are and then also the shape of the actives curve as we look ahead. We have Neighborhoods, which I don't need to go back into teens and families, a lot of opportunities on the peer-to-peer network side. And then eventually, medium and long term, looking towards geographic expansion and taking cash global. On the monetization side, also feeling really, really good about where we are and what the shape looks like. The credit products that Juan has been talking about, Cash App Card, Cash attach, things like tags, App Tags, Afterpay on the Cash App Card, feeling really good about our ability to monetize. And then on the engagement side, I would say some areas are great. And then some areas, honestly, like I think that we can do a better job, and I'm kind of always focused on these areas where I think we can do a better job, and I'm digging in here myself. So on the Commerce Enablement side, I think it looks really good. We have a 10% attached to buy now, pay later, which is both like quite meaningful, but it's pretty clear we're just getting started here. Similarly, I feel really good about the 4-week to 6-week cutover on the borrow side that Juan touched on. In terms of where I want to focus and where I think we can do better, it's really on the primary banking actives side. Growth moderated a touch Q2 to Q3. I'm confident we can do better, and we have a bunch of work right now that I expect to flow through in the coming quarters. But also we just want to call out that there's nothing that you need to believe or rely on in terms of like a reacceleration on the engagement side when you think about our 2027 preliminary guidance. So I guess, if I put all of that together, I'd say what we're going to do is, one, just keep on focusing on executing for our core customer base. There's still just massive opportunity there. Second, I think we're increasingly moving upmarket. Neighborhoods is pulling us upmarket. The incremental actives that Neighborhoods is contributing to Cash App skew more upmarket from an average household income perspective versus our core base. And so now we have an opportunity to build in that space. And then eventually, we're going to take Cash App global. I see my role in this as, one, what are we doing to drive more actives and really focusing on those differentiated distribution channels? And then two, do we have the right set of capabilities that we can then compose into Cash App so that more customers can do more stuff with Cash? And this whole thing is just going to result in more value for more customers. And then naturally, that's leading to compounding growth and thus value for shareholders. So that's how I think about the equation. That's how I think about where we are, and that's why I'm confident that we'll be able to execute and sustain really healthy growth into '27 and beyond.

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