Keeping It Simple

[eastunder]

XYZ shareholder letter

https://www.sec.gov/Archives/edgar/data/1512673/000119312525109972/d943129dex991.htm


To Our Shareholders

Our growth in the first half of this year does not meet our bar, and we remain confident in our ability to accelerate Block’s gross profit growth in the second half of 2025 and beyond. Cash App gross profit growth came in below our expectations, largely driven by softer inflows and Cash App Card spend than we had forecasted. We saw changes to consumer spending as the quarter progressed that we believe drove the majority of our forecast miss.

We understand the drivers behind our recent deceleration in growth and have incorporated updated views on the macro environment into our revised guidance for the year. We believe Cash App gross profit growth, and Block gross profit growth overall, will significantly accelerate starting in the third quarter.

We’re currently rolling out a number of new features that we’ve been testing at scale for some time. First, we are rolling out Cash App Borrow (small dollar, short duration loans) to millions more Cash App actives and nearly doubling the number of actives we can serve after receiving FDIC approval to use Square Financial Services to issue consumer loans for Cash App Borrow nationwide. Second, we are evolving Borrow terms which we expect will allow us to increase limits and improve the customer experience. Our machine learning models leverage real-time customer data, which we’ve used to maintain healthy loss rates for Borrow across historical cohorts. Third, we will be increasing Borrow limits for Paycheck Deposit actives as a tool to drive paycheck deposit engagement with our base.

We expect these enhancements to Cash App Borrow will drive gross profit growth through increased originations and improved unit economics. In addition, we believe they will drive benefits to retention, customer engagement, direct deposit attach rates, and inflows. More than half of Borrow loans are used within the Cash App ecosystem. We’ve also seen paycheck deposit actives that receive a Borrow offer are nearly 2.5x more likely to accept it compared to Cash App Card actives and over 13x more likely than non Cash App Card actives.1


While we’ve made progress on banking adoption, we’ve been too narrow in our focus.2 We want to expand the underlying Cash App network to drive actives growth and density. We’re now addressing 3 key areas:


1) Network density: We’ve prioritized web-based signup, new P2P features, and improving our referrals/invites and funnel. We’re also re-prioritizing a more concerted effort to attract and engage teens and families, a group we believe is massively underserved and one we’re well-positioned to support. With Cash App’s product depth, scale, and cultural relevance, we’re in a strong position to serve teens needs in a safe and trusted way.


2) Optimizing product controls: We’ve done a lot of work to make Cash App healthier and more resilient. However, we’ve observed that some of the controls we implemented unintentionally disrupted good customers. We’re refining our approach and increasingly focused on ensuring customers can rely on Cash App to run their financial lives, without compromising our ability to prevent and remove unwanted activity from the platform. These changes will contribute positively to growth going forward.

3) Increasing high-ROI marketing spend: After resetting marketing measurement last year, we’re continuing to increase our investment across channels. We’re increasing marketing spend nearly 50% in Q2 compared to Q1 to drive actives growth and engagement while maintaining strong ROI thresholds. We’re scaling our national Banking campaign in Q2 and we’re launching a new campaign focused on commerce and Cash App Afterpay.

Our updated 2025 outlook is not dependent on these 3 initiatives, but we believe there’s something meaningful here.

Square has shipped products and features faster and we’ve increased our go-to-market investments across sales, partnerships, and marketing. In Q4 we saw initial signs that this was driving progress. After Q1 we’re increasingly confident these investments are paying off. In the first quarter, we gained market share in our core verticals and we exceeded volume targets across our sales and partnerships channels. This gives us the confidence to continue ramping our go-to-market investments.

More large sellers are seeing Square as a partner to help them grow their business, and we’re going to keep delivering products that give our sellers time back through automation and AI. We grew GPV 8.2% year over year on a constant currency basis in Q1 and believe we will only improve growth from here.

We will be hosting our first ever seasonal release event for Square on May 13th where we will share over 100 product and feature launches with new and existing sellers. We expect these events to be a key part of our product release cadence going forward. This is a key part of the overall go-to-market motion changes we’ve been executing against as we focus on re-accelerating customer acquisition and deepening engagement across our product suite with existing sellers.

Finally, we’re shifting the entire company to build and use agentic systems. We helped lead the industry here with codename:goose and MCP, which many of our peers have taken an interest in and expanded. Our initial focus was to improve engineering productivity, which it has by ~30% already. We’re now expanding the use of these agentic systems to every role in the company.

Our first goal is to make goose our single interface for all of our functions to enable us to ship faster and be more efficient, and effectively automate the entire company in a way that wasn't possible before. Our second goal is to weave goose into our consumer and seller interfaces so that our customers have a personal CFO and COO respectively to help automate nearly all of their financial and operational workflows. We are creating an intuitive natural language interface (typed or spoken) that can prompt our customers proactively given our deep understanding of them based on 16 years of experience. We’ll achieve both of these goals by the end of this year.

Taken together, we anticipate Block topline growth to accelerate from a low point in the first half to the mid-teens in Q4. Improvements in Cash App gross profit will be the primary driver of the overall acceleration in Block topline but we also expect to see faster growth in Square and the first gross profit contributions from Proto, as we deliver our first chips and systems in the second half of the year. Removing macro volatility, we believe we’re now focused on all the right drivers to call this the bottom, and we’ll be able to achieve acceleration of everything going forward.


Jack