All right, let's—I think we can get started. Thanks, everybody, for joining. Hope the lunch was good and tasty. My name is Tien-Tsin Huang. I follow the payments and IT services sector here at JPMorgan and super grateful to have the Block team back with us. Jack Dorsey, Block Head, Chairman, Co-founder of Block, and Amrita Ahuja, Foundational Lead. She oversees finance, legal, and people at Block. Welcome. Thanks for joining us again on stage. Jack, we've been doing this for what? Seven, eight years? Something like that? I don't know. Maybe you're embarrassed.
Every year. Yeah.
Always great to see you and appreciate the update. Before we get started, I got to read the Safe Harbor statement. I'm pulling out the glasses. I'm getting older. Can't see. During this conversation, Jack and Amrita may make forward-looking statements, including about Block's preliminary expectations for its financial performance in the second quarter that are subject to certain risks and uncertainties, including changes in macroeconomic conditions. They may also speak as to certain non-GAAP metrics. Please take a look at Block's most recent filings with the SEC for discussion of the company's risk factors and for reconciliations of non-GAAP metrics for their most directly comparable GAAP financial measure. Further, any discussion of Block's lending and banking products refer to products that are offered through Square Financial Services or its bank partners. All right, I think I got that okay. Let's get right into it.
I gathered a lot of these questions from the investment community, so hopefully we cover everything. There's so much to get through, but let's focus on the near term just to get it out of the way, if that's okay. I know there's a lot of focus on near-term trends and dynamics around the guide, and I'm just curious, what led you to miss your expectations for the quarter? What were you seeing on the ground? Is there anything you can update us with in terms of what you're seeing in April and month to date? Maybe let's start with that.
Sure. Let's jump straight in. What we saw in April for Cash App was strong growth and an improvement from the run rates that we saw exiting Q1. I'll share two pieces of information. 1st, break down some of those April trends for Cash App. 2nd, I'll break down some of the nuances of month-to-month growth in Q1 that informed our guidance heading into the earnings call. 1st, gross profit for Cash App in April on a normalized basis, excluding some one-time benefits that we saw in the month, was 13% year- over- year. That compares to 7% year- over- year growth in the month of March. Meaningful improvement on year- over- year growth from March into April.
Inflows per active, which is a measure of the amount of money that people bring into Cash App, and for us is a measure of engagement of the utility of the platform, also meaningfully accelerated to 9% year- over- year in April. This compares to 5% year- over- year growth for inflows per active in March. Both of these metrics are very encouraging signs for us and the health of our platform. Both of these metrics nearly doubled the year- over- year growth, nearly doubled from March into April, which is very encouraging around the health of the consumer and their reliance of our platform and overall the resilience of our platform. Now coming to Q1, and some of the month-over-month metrics that informed our guidance. Typically, what we see in Q1 is an acceleration of inflows per active growth from January into February.
This Q1, we saw a deceleration. We saw something that looked different from prior Q1s, usually around that tax refund season. Overall gross profit growth, as you know, for Cash App in Q1 was 10% growth. Inflows per active, I'll just sort of share the monthly cadence so you can understand the data that we had heading into providing guidance. We saw 13% inflows per active growth in January, and that decelerated to 5%-6% in each of February and March. Much of that deceleration coming in the back half of February, and then into March. It is very encouraging for us to see this rebound into April.
We continue to believe that our guidance, which includes a softening in the consumer spend environment, which we have not seen through April or even through the early part of May, which continues to also be strong, is a conservative guidance, and is a guidance practice that deviates from our prior practices, which is really to give you a number that's as close to the pin as possible.
We continue to have conviction on the back of this that we can accelerate our growth for Cash App and for the overall company in the back half of the year on really four key drivers that we have very clear line of sight around: Borrow expansion, continuing to ramp Afterpay on Cash App Card, which we recently released, continued share gains in the Square business with improvement in GPV through the remainder of the year, and the launch of an entirely new business for us with Proto, which is our Bitcoin mining chip, which we expect to launch in the back half of the year.
All right. Good. No, that's a good update. Let's try get through all of those subjects, but I thought we'd start with Cash App since that did surprise a little bit at 1st. There's a little bit of a change of strategy. Jack, you talked about it in the letter. There's a decision here for you guys to now drive active growth and density. That is new. Why now? Why make that change now? I'm curious what metrics we can hold you guys accountable to see if you're achieving that. Is it simply active growth? Is it payroll direct deposits? Is it ARPU? What should we be tracking?
Yeah. 1st, this does not represent a change in strategy. We put way too much focus on engagement instead of growing the network and making the network more dense. We benefit, everything in our business benefits from a strong, growing network, but also a dense network graph, meaning that any one customer is touching more than four other customers or more. If we have that network density, and this is true for any network business, it could be social media, it could be anything, that you have to focus on density 1st and foremost. That leads to more absolute growth of the network, and that allows you to do even more engagement, which is what banking represents for us. We are not changing our strategy. We want engagement, but we took too much focus off the network side.
That's just the base virality models that we were born with, which is peer-to-peer, and everything associated with that. I don't think there's an upper bound to this. I don't think we've reached it. We do have other competitors, and you could call these other—you could call peer-to-peer the space commodity. We had one of the Co-founders of PayPal as our COO for quite some time. His name is Keith Raboy. He's excellent. He was telling us this same story where it's a cap tam, and you already have giants in it in PayPal, and we should not do it. We should not do Cash App. We built Cash App, and we did it. We made it work, and we made it successful. We did it because we could invent on the interface.
Our company for the past 16 years, our one strength, if there's anything, is simplifying something that's very complex for people. Operations for sellers, simplifying the operations so they can make more sales. For individuals, it's finance. The world that we're going more and more into is not necessarily just entirely about paycheck deposits. It's about inflows. It's about getting money from my gig work, from some other random hustle, from streaming, from all these flows.
If Cash App can be a hub, and also present a spending device to these folks, and more and more of them are teens, which is a big part of our focus, then not only can we grow the network, but we can also grow the density, and we can build engagement because we're looking for banking products such as Borrow to provide a bridge to when they're going to be paid more and whatnot. We are not changing our strategy. We are just refocusing and balancing the focus to make sure that we have the right fundamentals in the business, and they continue to push, and they continue to grow. We are seeing early signs of that, and we are going to see even more of that as the year goes on. I think it is going to be at a much faster velocity than we assume.
Certainly, what we were able to do with Square and its turnaround, it took us multiple years to fix all the technology and now to see a different inflection point where it's growing again. With Cash App, it can be much faster because our tools are better. Our focus is much better. Our understanding of what we need to do is stronger. We just have a lot more clarity around how all these pieces fit together, and the organization now to back it up, given all the organizational shifts we've made.
Got it. Got the shift in the focus. You both mentioned Borrow as being important for Cash App. I know it's going to be a driver in the 2nd half of the year. Jack, from the very beginning, I've always admired it, right? Financial inclusion, banking, the underserved. Borrow is going to be a big part of that. Given the uncertainty in the macro, I get this question a lot. Why are you optimistic that now is a good time to push Borrow in this uncertain macro environment?
Because Borrow is not just like a typical lending platform. It is more about cash flow. It is helping people provide a bridge to when they actually do get paid. It is recognizing that most work is postpaid, and we are giving them advances on that so they can get to that paycheck or can get to that. These are small amounts. They are custom. They are actually inferred by what the person is doing and what the person is capable of. This is not new to us because this is exactly how we started Square Capital, which is now called Square Loans. Every single merchant that we encountered went to a bank, and they asked for some money to lend some money. The bank's minimum was like $10,000-$25,000.
It is just overburdening to the seller when all they needed was $5,000 or $2,000 or even $1,000 to buy a new salon chair, which would literally double their business, and help them make more sales. Being able to pay it back in time with the swipe of their customer's credit cards was the magic. We think we know that there is a similar magic on the consumer side with things like Borrow. I do not think Borrow is the endpoint. I think there are other methods, and I do not think buy now, pay later is the endpoint. I think there is new repackaging of these tools to give people better cash flow, both consumers and sellers, that we are going to explore. I think we can get to them quite quickly within this year as well.
I just add, Tien-Tsin, we're mindful of the dynamic macro backdrop, but our Borrow expansion in the back half of the year is not predicated on widening the risk aperture. It's actually just about expanding the product to customers who we know a lot about and engage with in other parts of our ecosystem who we haven't been able to offer Borrow to. We're able to do that and double the number of actives in Cash App that we can offer Borrow to, because we're now servicing and originating Borrow through our own internal bank, Square Financial Services, which also gives us better unit economics on an already profitable P&L to be able to play with and experiment as we do think about potentially opening up the aperture, and then improvements in our underwriting model.
Finally, tying Borrow into paycheck deposit actives, providing guaranteed access to a product that, as Jack said, has resonated really strongly as people think about their own working capital in a world in which they're not relying on traditional credit cards as much. The 1st point that I'd make is the quality of our underwriting capabilities. It's a true core competency for us as a company, one that we've honed over this past decade, starting with Square Capital, Square Loans. We have real-time data that informs our determination of eligibility that we're able to update dynamically on a daily and weekly basis. These, as Jack said, are short-term, low-dollar loans that give us the ability to pivot quickly if anything does materialize in terms of the difference of the health of the consumer.
Yeah. So before we pivot to Square then, just Jack, to close out Cash App. Again, started with PDP. You're driving engagement. You're going to grow the density, grow the network. From a metric standpoint, we're just thinking big picture, what should we pay attention to from the outside? What should we be watching for on the Cash App front this year?
In terms of the metrics?
Yep.
I mean, I would definitely look at our ability to grow the active base. We want to build a service that's not just usable one day a month. Monthly is great, but a financial service like ours, it should be focused on how often people are using it weekly and getting to daily and our ability to build products that make it more and more a much faster time frame. That's what I'm looking at is, can we do that? Certainly, are we able to be that hub for people where they can inflow money from all over the place, and we can help them manage it, and we can add things to help them manage it even stronger, such as Borrow or the evolution of what that is. That flows everything that flows goodness throughout the entire ecosystem.
The next thing is just what are the vectors to increase that growth? We think teens is a massive one. Teens love Cash App. We have not really gone down a concerted effort. We did to start, and then we had to pause it for a little bit, and now we are back on it. The other thing is looping in with the local neighborhood and showing off Square merchants and creating a viral loop between the two. That is in testing right now. It is not something that we just want to blanket across the United States right now because we believe we need strong density on both, at least on one side, which is the Square side. When you open Cash App, you actually see merchants that you want to go to, and you want to interact with them. You might want to do pickup.
You might want to get instant cash back from them. These are tools that we can bring to bear. The fact that we're both sides of the counter means that we can help with the price of our services as well. We are testing this slowly and deliberately to make sure that it really scales and we can use this to increase Square merchants and also use it to increase Cash App customers. The early data says yes. It is just a matter of getting that density. That is where on Square, field sales comes in and building that density and then bringing it to this canvas of Cash App.
All right. Good. My daughter got Cash App for her birthday, by the way, Jack. You should be happy to know. It's for real. Not just saying that. Last year on stage, we talked about Square under your leadership, accelerating product velocity. You're shipping those faster. You mentioned the field sales and go-to-market getting better. You're seeing the benefits. Today, I think you're hosting your, I think you're calling it the biannual product release event. I haven't tuned in. I apologize. Can you give us an update on what you're showcasing to sellers and how it's going to translate from a performance standpoint?
Yeah, well, it's happening later today, so if you want you can tune in.
Okay, good. I'm a little behind.
You don't have to. The biggest thing we're announcing, I think Owen has in his pocket. Will you stand up and just show it? This is our new reader.
Nice.
This is Owen, everyone. He's awesome. More awesome than Owen is this new reader. It is Square Handheld, and it is the thinnest device on the market. It is the best priced device on the market. It is the most durable priced on the market. We have been a hardware company for 16 years. We built the hardware, and we built the operating system, and we built the software on top of it. We have the full vertical integration, meaning that we can build really compelling experiences and do them much quicker than a lot of our competitors who work with outside vendors and just do not have the insight. We have actually ASIC engineers in the company building stuff for this for security, which is why we are able to translate them into building Bitcoin mines as well and having a relationship with TSMC where we can get to the three-nanometer presses.
This is probably the biggest part of the announcement, but today, we're announcing probably the largest product announcement and set of releases that we ever had as a company. It's 100 products and features that are all going to be announced today in one big group. We're doing this twice a year so that our sellers have more predictability about what is available today and what is to come. We're going to show more of our roadmap so they can make early decisions to come with us versus a competitor. They can see that those features in the products that they want are actually being fulfilled by our team. They'll be on schedule. They'll be on the spring and the fall release schedule. This is not something we've ever tried before.
We think this is going to help, again, predictability for our sellers, but also it's going to help our sales staff showing what our roadmap looks like, what we're doing, what's available. We just have a lot of sellers confused about what we offer, and they don't think we offer it. Now we're just collecting it in one page and releasing in these bundles, which just makes it much easier for them and gives them time back to just, yep, I'm going to go with this because I know it's going to be there and I can use it. The hardware is great and the software is great, which is what we consistently hear against our competitors. The sales has been a vacuum in the past, but now people are actually visiting me and talking with me.
That's the outcome we want to feel and we want our sellers to feel.
Good. Now, glad to see that new form factor. And I know the product, when you 1st invented it, sold itself. I think we'll get a lot more of the detail. I look forward to paying attention to that. With marketing and your philosophy around sales and marketing, I think Q1 I wrote down here was up 33% in terms of your marketing spend. I'm curious how you're spreading your bets now across field sales and then working with channel partners, banks, and ISOs. I know a lot of success in payments historically has come through that. You started through more viral sales, but you're pivoting into that. How are you balancing all that without losing your roots of letting the product sell itself, Jack?
Right now, self-serve, so this is someone going to the website, downloading the app or buying hardware themselves, is about over 80% of how people get into Square, whereas sales-led or partnerships is 20% or the balance. Our internal goal is to 50/50 that. The reason why is because we think we can move much faster on the sales and partnership side, but we have the benefit of the self-sale because the product just works. The reason we emphasize self-serve to begin with and we did not build a sales staff is because we felt like that would be the bar for, is the product intuitive enough that anyone could do it without us helping them do it? That worked for quite some time until our competitors just flooded the streets with salespeople and then offered free hardware and locked people into contracts for two years.
Now we're starting contracts. We're giving free hardware. We have people that are going door to door and talking about it, but we also have the most intuitive hardware and software out there, which is going to improve on a much faster cadence now that we did all of our work on Square and we did all of our reorg. I think it's at a state where we can exceed our expectations after today. This is a good jumping-off point for us. I would want you to measure us by that development velocity and by our shipping speed. The numbers will catch up, I think they will catch up in a surprising way. We have to get back to shipping and high velocity across both ecosystems to do that.
The early returns we're seeing so far on field sales, tele sales, and on partnerships are really strong. As Jack said, after today, disseminating that and pairing that with increased investment in marketing, should only continue to grow. What we're seeing in terms of field sales is we're landing much larger clients, some of which we featured in our shareholder letter, but now at a much greater scale. We're seeing outperformance from a partnership lead generation standpoint, both in terms of numbers of leads as well as dollars behind those leads into the field sales team. The flywheel of marketing and into partnerships, into sales is working, and it's something that we're going to continue to invest behind.
Good. No, I think it's an important change. I think just thinking back to last year, Jack, you talked about wanting to get the company back to having this entrepreneurial, innovative spirit that the company started with design and product. I'm curious where you think you are in that journey. It sounds like we're starting to see some of the benefits now. I know you've also talked about agentic systems and leveraging AI to accelerate some of these things. Judge yourself. Where are we in that journey?
We're back. Yeah, I mean, we have some cultural things to shift, but I think generally we're back because we're focused on something that is just mind-blowing to me and not something I expected us to ever be good at. I thought we were very behind. I know you all have heard a ton about AI and agents, and I'm sure you're sick of it. We're focused on this concept of autonomy and true full autonomy. What's different about that is what we want to do is we have 16 years of understanding and experience with sellers and individuals. We have these core capabilities, which are very hard to build, very hard to acquire, including a bank, SFS. These capabilities are in two categories, which are finance and operations. Finance for both sellers and individuals and Cash App and operations, which is business operations.
Where we're great is inventing on the interface. If you look at our whole history, it's all about how we've invented on the interface and made something very complex, very simple, as I said before. What we've done, and this is a completely underrated part of our business right now, I know, because it's not part of the business, but it's a tool that we built. It's called goose. If I could ask you just one thing, it would be to search for code name goose. If you have a Mac, this is going to be much easier. I know a lot of you have ThinkPads, but if you can borrow a Mac for a little bit, download it and hook up Google Gemini or Claude or any model.
This is model independent because I think a big part of this future is not having the model, but being independent of all these things. You can literally tell it to build a program of any desire that you have, and it will do it fully without you looking at any code. It's really, really good at websites right now. You can say, like, I want to do this with your kids. Build me a Go game, a 9x9 Go game where I'm playing against the AI. It will build all that. It will open up your web browser and allow you to start playing. It usually does it in one shot without using any code. You've heard a lot about Windsurf. You've heard a lot about Cursor. These are all tools to help engineers become better programmers.
Goose is about AI becoming better at programming itself and having full autonomy to make all the decisions it needs to. There is always going to be trigger points where it needs to be verified by a human, and that is really the focus. Our whole goal is full autonomy in the space of finance and operations, including the operations of our business. We are building an app and a portal that every single one of our employees will log into. Every single bit of work that they have to deal with, we will be able to show them within that interface because this is a program that can literally write programs in real time to design an interface to handle that task in the moment. This is the incredible thing.
I promise you, you can feel it for yourself by just doing this and pushing yourself a little bit. It works. If it does not work, you literally tell it, fix it because it does not work. You can take a screenshot and say, this looks terrible, and it will fix it to make it look great and work. This works today. It is accelerating every single week. Our push into this is autonomy and using the data that we have to prompt people instead of expecting them to ask the right question. A lot of the model today is going to a ChatGPT and asking a question or going to a Claude and asking a question. We have all this data around finance and operations, business operations. We can actually prompt our sellers in real time so they do not even have to ask the question.
We can answer the question for them so that they can then refine those questions and ask new questions based on what they see. This has not been done before at scale, at least in those spaces, maybe anywhere. We're still in like you prompt the thing instead of it prompt you. Those are the two things that we're really going to build to bear. I think it has a phenomenal acceleration to both of our businesses, Cash App and Square, but also has potential. If we can help automate our company, we can help other companies automate their companies as well. I think that's potentially a 3rd leg of what goose represents. This is probably not the name that we eventually go out with, but you'll see this in Cash App.
You'll see this in Square, and you might see it in something new that helps productivity for companies like ours and much, much smaller. It's all around autonomy.
Got it. No, as a team, we will definitely explore, and I'll report back. We've got seven minutes left, guys. Thanks for going through that. Let's skip ahead. I did want to talk about you mentioned finance operations, Cash App, Square. I have to ask you about the connection of the ecosystems, but I did want to update for both of you, if you haven't seen it. We did our updated online checkout survey, and Cash App Pay once again scored really high. I was surprised by that. Afterpay was the 2nd most preferred BNPL provider in the survey work that we did. I've been saying to investors, I feel like Cash App Pay is a little bit of a sleeping giant. I think you just announced, right, Amrita, Domino's?
That's right, Domino's, yeah. 7 million consumer actives on Cash App Pay.
I'm curious, given some of the demand there, you just talked about agentic, which is exciting, but it does feel like at the core here, there's still some things to build on that would bridge the two ecosystems. Is that a fair way for me to interpret that? How big of a priority now is it, Jack, for you to think about connecting the ecosystems?
I think it's a, well, I don't think it. I know it's a big priority for us. That is one view of it, which is Cash App and Afterpay. And certainly, that's working better than ever before. We had a two-year walk through the desert of despair with Cash App and Afterpay, Afterpay in particular, because we just tried to integrate them way too soon. And we didn't let Afterpay be Afterpay and kind of lead us into the direction where it is now, which is beneficial to Cash App and removing the seams there. So that's done, and on the path towards more of it. But the really interesting thing is having both sides of the counter, having Square and Cash App. And that's where the neighborhood network comes in. And it's in testing right now. It's in Portland and a few other cities.
We have some things that we are slowing intentionally because we want to build density and others where we just want the seller to not have to think about it at all. How do we ingest their menus entirely using these new tools so they do not have to deal with it? We have full inventory so that we can present that to a Cash App customer.
Yeah. I mean, the connection of the two sides of the data that you have, and then some of the autonomy that you're talking about, I mean, it just feels like there's a lot of potential there from a modernization standpoint.
Yeah. Also, the things we do not talk about that are also in the neighborhood network are the staff of the seller. They are often using Cash App. Being able to pay them and offer new instantiations for them is really incredible. This world of autonomy where we have these capabilities and we have interface, the interface is generic, and it can pull from any capability. It can pull from a Square capability. It can pull from a Cash App capability. It can pull from a workplace capability that we are using. It is all in one interface, right? The navigation and even the brands do not matter as much anymore because it is so, so fluid. We just need to prove that out. That is going to be a this year thing for us.
We're pushing super hard to get that interface invention out because I see a lot of what our competitors are doing are very much at the surfer level of current capabilities for LLM models and not leaning enough into autonomy because they just don't have the data to prompt the people with it, whereas we do. We have the assets.
Yeah. No, it feels like the pieces of the ecosystem are coming together. I know it's changing, but it is coming together. Three minutes left. I have to ask you a Horizon three question. I know, again, not to always come back to last year, but last year, you said your chip and mining system would be a source of upside in a couple of years, Jack. And in your letter, you referenced Proto. Amrita, you mentioned here as well. I think it's going to contribute to gross profit growth for the 1st time in the 2nd half. So where are you? I know it's year one of the two-year thing that you called out, but how enthusiastic are you about Proto and what the potential is?
Very, very enthusiastic. We have one competitor, and we built Proto because we talked with all of our potential customers what their needs are. And their biggest are reliability, customization, and a lot more flexibility to build their own systems with our chips. And we're hitting all of them. Of course, a speedy process. We are on a three-nanometer fab. We're on track to delivering when we said we're going to deliver, which is the back half of this year. We have a large pipeline of customers, both the very large and also the smaller, more niche ones that are looking to integrate these solutions. I'm super excited about this. If you're into Bitcoin and into the mining space, there's nothing more exciting than actually seeing the device and hearing the fans where, at an extremely loud and annoying rate, it works.
We have a beautifully designed mining rig that fits in everything our customers are asking for. If they do not want a full rig, we have chips so that they can design their own systems around it, which is that customization factor. Super excited about this launch and us proving to you all that this is going to be a big market for us and a big part of our company going forward.
All right. We'll ask for updates as we keep going and see where that year two mark stands. Ninety seconds left. So let's close it out. Glad to hear that Block is back, as you called out a couple of times. Always like those memes, by the way, but we're back. Got to find one for the note. I'll end on asking a stock question then, if that's okay. So the stock didn't react well, of course, to the quarter. We talked about that a little bit. And I was looking back, thinking, it was back to 2018 levels. You guys did free cash flow, what, $250 million back then? You're doing $1.5 billion now, 6X where you were. Stock's back to where it was.
Maybe my question is just the message here to shareholders on your commitment to win back their trust and to get the stock going and drive a change in the narrative. I know storytelling is so important. Amrita, I think you appreciate that. What do you think, Jack? What is your commitment to get the stock going?
I mean, nothing I say on the stage is going to help that believability. It is us going to be shipping. I think the focus has to be on our shipping velocity and that people are excited about what we are shipping. I guarantee that that will result in the numbers. It took a long time to do this with Square, but we got it. We are reversing that trend, especially in a very challenging economic environment. I think we can do it the same way with Cash App, but much faster because we just have much better tools. Rule of 40 remains a guiding goal and a guiding principle for us. Ultimately, we have to be measured by our velocity because everything is moving much, much faster.
For us to truly win and to change the numbers, we have to be steps ahead of the expectations of our customers. Those are sellers and also individuals. Those are teens. They have expectations right now about what type of interface they're going to use. Really, it's all about who owns that interface. That's who ultimately owns the experience. Everything else underneath is going to become commodity. That's what our strength is. By us being able to really understand our capabilities and then really understand our requirement and need and necessity and excellence on innovating and inventing in the interface, that's paired with the velocity, is what is going to change numbers. That's what I'm watching. Don't believe me, believe that because, again, nothing we're going to say is going to change anything.
It's just how quickly we can move and adapt to the changing environment.
Great. No, and we'll hold you to that. Thank you both for being here. It's a fun stock to cover. I learned a ton from following it. I equally think it's very fun to catch up with you both. Thank you for the time.
Thank you. Thank you all.
Thank you guys.