Block Renews Bets on AI, Ecosystem Lending as Growth Softens

Core Insights - Block's Q1 2025 results indicate decelerating growth in gross profit for both Cash App (10% YoY) and Square (9% YoY), with stagnant user growth posing risks to its network-driven model amid macroeconomic uncertainty [1][4][7] - The company is at a strategic turning point, focusing on AI, digital lending, and brand repositioning to drive future growth [1][3][7] Financial Performance - Cash App generated $1.38 billion in gross profit, a 10% increase year-over-year, but down from 25% growth a year prior [4] - Square contributed $898 million in gross profit, reflecting a 9% year-over-year increase [4] - Block revised its full-year gross profit guidance to $9.96 billion, indicating a more conservative 12% year-over-year growth forecast [7] User Engagement and Strategy - Block is expanding its "bank our base" strategy by leveraging credit products and machine learning to enhance user engagement, particularly among direct deposit users [2][10] - The company faces challenges with Cash App's monthly transacting actives, as user base expansion has stagnated despite rising gross profit per transacting active [5][11] AI and Innovation - Block's internal AI initiative, "goose," aims to automate workflows and decision-making, with expectations to improve engineering productivity by 30% [8][9] - The Cash App Borrow product is central to Block's monetization strategy, with users who deposit paychecks being significantly more likely to accept loan offers [10][11] Market Position and Future Outlook - International GPV growth for Square is at 15% year-over-year, outpacing U.S. growth of 5.6%, indicating potential for expansion in untapped markets [12] - Block is recalibrating its approach by investing in AI, refining financial offerings, and targeting both Gen Z and mid-market enterprises to secure its future in finance [12]