A couple more people come in. All right. Let's get something out of the way as some people are finding their seats here. So we're going to start with a legal disclaimer. During this conversation, Owen may make forward-looking statements, including about Block's expectations for its financial performance that are subject to certain risks and uncertainties. The statements are based on information available to us and assumptions we believe are reasonable as of today's date. That's in Block. We disclaim any obligation to update any forward-looking statements except as required by law. He 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.
Reconciliation of non-GAAP metrics to their most directly comparable GAAP financial measures are available in our shareholder letter and our historical financial information spreadsheet, which is available on the Investor Relations website. Further, any discussion of our lending and banking products refer to products that are offered through Square Financial Services or our bank partners. All right. That was perfect timing for everyone to get their seat. Thank you for joining us today. So we're really, really glad to have with us today Owen Jennings, who is the Block Business Lead. We also have many members of the IR team here. We have Janina, we have Katie, we have Nikhil. Thank you to everyone for making the trip to Arizona and for being such a big part of our conference. All right. So let's do an intro to Owen.
I think many of you have gotten to know Owen over the last few years as he's become more a part of the investor discussions, but he was also a big part of the Investor Day. So Owen's role, it's a little bit of a different title, right? He's the Block Business Lead. But really what he does is he looks after Block's business performance. He's been at the company since 2014. He's had numerous operating and leadership roles across both Square and Cash App, and his current role actually oversees a large number of functions. I'm going to list them off just to give perspective, but it's all of product, it's business operations, it's financial operations, it's executive operations, it's customer ops, and it's customer support. So with all that, again, Owen, thank you so much for being here. Second year in a row.
Thanks for having me, Tim. Appreciate it.
All right. We're going to get started with a Q4 update. So we want to spend most of the time on some of the longer-term, bigger picture stuff, and coming out of the Investor Day, there's a lot to cover. But we're going to spend a few minutes at the beginning just to talk about the near-term numbers.
Sure. So I don't think there's that much new to share relative to Investor Day and Q3 earnings. I think on the Square side, we continue to expect GPV growth in the low double-digit range. So a slight deceleration relative to Q3, largely driven by some weather events in October. And then also we're comping a pretty strong holiday spend season last year. So that's kind of in the 10%-ish range there for Square. And then on the Cash App side, we're excited about the strength that we're seeing with Cash App Actives. We're excited about the launch of Cash App Green. And so I think that overall guide of about 19% gross profit growth and 39% growth in adjusted operating income is still the right ballpark just in terms of how we're seeing things shake out in the quarter.
All right. Great. And thank you. And on the Square GPV that you mentioned, just for what it's worth, that 250 basis points tougher comp from last year. And for what it's worth, we are already modeling a slight deceleration from Q3 levels because of that comp that you called out. All right. Well, we said we would keep that quick. Let's keep to our word. Let's move on to some of the key Investor Day highlights. So it was a really great day for Block, and I would say for all of the payment sector. The day provided a great opportunity for us to look at Block's vision and strategy really for the next three years and beyond. So we wanted to start by giving Owen an opportunity just to expand upon some of the real key highlights for him.
Appreciate it. It was great to see you there. I think I'll start on the Cash App side. So on Cash App, really focused on the ecosystem that we've built across our network products, our banking products, our commerce products, our Bitcoin products, and then now with the launch of MoneyBot, our AI products. I think some of the key callouts are probably one, Cash App Green, which we released at Cash App releases. This is really providing a clear way for us to drive that primary banking activity on Cash App. We also announced Afterpay on the Cash Card pre-purchase, which I'm really excited about. So we'll be piloting that in the coming months. This is a huge paradigm shift for consumer credit. And it's pretty unique for Block just given the scale of the debit card program that we have.
So Cash App Card is the fourth largest debit card program in the United States. And now we're putting buy now, pay later functionality on top of that debit card. And it just looks completely different than what some of the competitors are able to do given the scale that Cash App is operating at. On the Square side, I think that probably the two main callouts that I'm really excited about are ManagerBot and then also Neighborhoods. And so on the ManagerBot side, what we've been able to do is leverage the strength of the foundational models to give tools to our sellers that let them automate so much of the day-to-day work that they have to do. And this is not just simple kind of queries and insights.
This is actually allowing us to give sellers tools where they can automate tasks that used to take hours and hours, if not days. And we're condensing that into just minutes. And then I think probably the biggest theme, and hopefully we'll talk about it more, is Neighborhoods. That's kind of the third pillar of our overall strategy, our overall master plan, is to connect buyers with sellers through Cash App and Square throughout the neighborhood. And so Brian walked through some impressive metrics on the neighborhood side. And we're really excited to increasingly scale that product and just watch the acceleration both on the buyer side as well as the seller side.
All right. Excellent. Our next couple of topics are going to stick with the Square theme. So we're going to move into the growth path through 2028. So I mean, the bottom line is accelerating trends, right? And I think that's probably all I need to say. And I was hoping you could put a little bit more color on that path through 2028.
Sure. I think there's also, we do expect an acceleration in GPV growth as well as gross profit growth over that three-year period. And I would break it down into the product side as well as the go-to-market side. So on the product side, we're just really excited about some of the key features and products that we're working on from Neighborhoods to ManagerBot to really just functionality for some of the core verticals. We have been focused over the past 18 months on quick-service restaurants. And I think we're going to continue to focus in that vertical, but increasingly building for full-service restaurants, the retail vertical, and really all of the neighborhood spots. I think we also have a massive opportunity to drive SaaS attach rate higher as we think about our new pricing and packaging on the Square side.
So those are some of the key product elements. But then on the go-to-market side, it's about kind of full-funnel marketing from brand all the way to the bottom of the funnel and then our investments in the sales team. And so we're seeing really strong ROIs across all of our go-to-market activities. And when you put those two things together, that's kind of what adds up to this acceleration in GPV as well as gross profit.
All right. Perfect. Let's dig in a little bit deeper on one of those topics, which is the evolving distribution approach. So in the past, it was kind of 80/20-ish in terms of self-onboard versus sales and other. And it looks like this year it's more of a 70/30-ish mix, and eventually getting to 50/50 is what you've talked about. Can you just talk a little bit about that evolution and what's kind of in that other 30?
Sure. I do think the self-onboard motion that we have at Square is kind of a superpower for us. There's not other point-of-sale companies where a given merchant can self-onboard. And so that was one of the magical things early on for Square. And we're going to continue to invest in that. There's still a lot of opportunity to make that as simple as possible, as low friction as possible, make sure that we're getting the reach to all prospective sellers. At the same time, we're increasingly building out our sales team. So now we have Nick Molnar at the helm running sales and marketing for all of Block. Nick, who is the co-founder of Afterpay, is one of the strongest sales leaders in the world, in my opinion.
And there's a few different pieces here, but I guess two of the big things are just continuing to focus on telesales and then also building out field sales. So on the telesales side, we've had that motion for some time, but we have a huge opportunity to continue to scale that team, not just in the U.S., but also internationally. And then on the field sales side, I think actually I was here last year and I was telling you we have our first cohort of field sales and it's going to be great, it's going to be awesome. And you were like, "Okay, well, we'll see it when we see it." But here we are a year later and we have roughly 100 field sales reps. It's very formulaic and mathematical in terms of how we're thinking about that.
We're going to continue to invest here up until a certain marginal ROI threshold that we have. And we're seeing just phenomenal returns, phenomenal paybacks. And so we think we have a lot of room in the U.S. to continue to invest there. But then also we have the ability to bring all of this machinery that we've built for the U.S. into international markets. And so I think what you're going to see over time is just as we continue to lean in on the sales side, you're going to see a larger and larger share of NVA, new volume added, coming from the sales team versus self-onboard. But just to be clear, the goal is that the overall pie of NVA is growing in a pretty meaningful way. And also you're seeing a mix shift. So I really don't think about this in terms of cannibalization.
I see this as just continuing to drive new volume across all channels, and I think it's incredible that we're in a place now where you have Nick just laser-focused on this outcome on the go-to-market side.
Excellent. Thank you, Owen. Let's move into another topic here on Square, which is penetrating the food and beverage vertical. So investors often look to the upmarket, meaning larger merchants in general, and the restaurant vertical in general as two of the more competitive areas in payments. But the reality is when we look at your numbers, upmarket has been one of the faster growing areas, and food and beverage retail has been one of the faster growing areas. So with that as context, I think what investors are really looking to know is how do you view your competitive positioning in restaurants with larger restaurants, both on the QSR side and the FSR side?
I think what you're seeing right now is the result of our focus over the past 18 months. So we said we're going to focus on moving upmarket and we're going to scale our sales team and we're functionalizing the company and putting Nick on top of that. And we said we're going to focus on food and bev and QSRs in particular. And now you're seeing the results where we are meaningfully moving upmarket and taking share there. And on the food and bev side, you're seeing GPV growth run quite a bit hotter for food and bev versus other verticals. I think the number we gave at Investor Day was 17% year-over-year growth for food and bev GPV.
That's been a result of tremendous focus and high velocity on the product development side, but then also some of the go-to-market, some of the go-to-market motions that I talked about before. In terms of our competitive positioning, we had some gaps on the QSR side, call it 18 to 24 months ago. We've launched more than 100 features. Now when I talk to sellers, I talk to prospective sellers, I talk to folks on Nick's team, there really aren't that many gaps. There's always incremental things that you can build for a particular merchant. But by and large, we're extremely competitive. I really like the win rates that we're seeing there. I spent a lot of time talking to sellers and prospective sellers. I think that we feel really good about quick-serve restaurants.
Moving to the full-service restaurant side, one of the things that was interesting when we functionalized the company, and I came back onto the Square side and Nick took over as the head of sales, was just how well Square works for upmarket merchants and frankly for upmarket full-serve restaurants. I think there's a meme or a brand perception that Square is just for smaller businesses. But we have hundreds of thousands of large sellers in this vertical who are using Square. And so I think a big part of this is going to be around the distribution side. That said, there's some key products and features that we know that we need to build. And it's like relatively trivial things like enhancing how coursing works or some FSR-specific analytics. And so we can get those things out.
We think that we can be just as competitive in the full-service restaurant and the simple retail space as we are in the QSR space. That's really critical to the long-term strategy of the Neighborhoods. Like, our whole goal here that I'll keep on harping on is let's get Square on as many countertops as possible in the neighborhood. Then let's connect all of those sellers to buyers using Cash App. So a bit more to build for FSR and retail, but generally feeling really good about our competitive positioning.
All right. Excellent. We're going to move on to a final topic on Square before we move to Cash App. But this relates to this whole growth differential between GP and GPV or gross profit and gross payments volume. So metrics that were mentioned at the Investor Day, right? NPA and NVA, so new profit added, new volume added. And what you mentioned was that in the U.S., you actually saw the new profit growth outpacing the new volume growth. And I think that was a standout to many investors. And it relates to the commentary that you gave throughout the guidance experience for the total Square segment. You actually expect the volumes and the gross profit to grow at a similar level. And I was wondering if you could just elaborate on that broader topic. It's an important one to investors.
Sure. So we gave guidance on the next three years. And so during that period, we do expect that by and large, GPV growth, processing volume growth will be in line with gross profit growth. The key levers that are kind of driving some of the changes here are we are increasingly moving upmarket and we are having a large degree of success internationally with Square. And so when you think about what that does on the margin side, there's a slightly lower take rate for the larger the seller is or the more that new volume added is coming from international. But the flip side of that is that larger merchants are way more likely to adopt our SaaS products, which is obviously accretive from a margin perspective. And then just more generally, I think we have a ton of room on the SaaS side.
We launched unified pricing and packaging just a few months ago. And I think that we have a huge opportunity to just increase the attach rate to our software products by tweaking how that system works, looking at the tiers, looking at the pricing. I think if you look at Square and you comp us relative to some other players in the same space, the share of gross profit that's coming from software is lower than you might otherwise expect. And so there's basically an offset happening here where we might make a little bit less on the payment side, but we intend to make more on the software side. And that should probably net out with GP and GPV roughly in the same spot.
All right. Glad we tackled that. Let's move on to Cash App. So in addition to that recent return to growth in MAUs, they were up quarter over quarter in Q3. You laid out a longer-term plan over that three-year period to have Cash App gross profit CAGR at roughly a high teens level. So before we get into more specifics, maybe you could just talk about that growth path through 2028.
Sure. The way that I think about gross profit on the Cash App side, on the consumer side, is what we call internally the inflows framework. But basically, you have actives, you have inflows per active, and then you have your monetization rate. And I think there's a number of key levers that we're talking about that hit on each of those. And that's what ends up coming together to compound in that strong gross profit growth rate over the period. On the active side, some of the key things that we're talking about are, one, obviously our marketing motion in general, our focus on this concept of multiplayer money and just continuing to make money more social, continuing to build for teens, continuing to build for families. Over the medium term, I think Neighborhoods will be a massive, massive driver of Cash App actives.
On the inflows per active side, this is really just about engagement. When you take someone from a simple peer-to-peer active to, let's say, a more engaged banking customer, they're going to inflow way more. So the Cash App Green program that we just announced, frankly, MoneyBot with the ability to cross-sell, upsell with personalized content is a big driver of inflows per active. And then on the monetization side, there's a number of levers we're focused, as I talked about at Investor Day, of kind of reclaiming our spot as the best place to buy and sell Bitcoin in the United States with Cash App, Afterpay on the Cash App Card pre-purchase, Afterpay on the Cash App Card post-purchase.
We have bets and we have our roadmap laid out in a way where we can drive meaningful growth for actives, inflows per active, and monetization rate, all of which is going to lead to that overall gross profit number.
All right. Excellent. This next one we can maybe keep quick because you kind of hit on it earlier a little bit, Owen. But you mentioned the pre-purchase BNPL functionality, which is launching and going to be out in early 2026. Maybe you could just talk a little bit more about that product. And just in the interest of time, when we talk about card products, the one that maybe is not there is a secured credit card. And we often get asked if that's something that could potentially be launched down the road or whether or not that's even necessary.
Makes sense. So on the buy now, pay later on the Cash App card, I think what the younger generation increasingly wants is a debit card plus buy now, pay later. They don't want to get stuck in a revolving debt spiral. And we're seeing that play out in terms of attach rates to our products with the teen cohort and with folks who are in their late teens or early 20s. And so we're bringing that to market. We've already brought it to market with Retro. Pre-purchase is even better because you don't need to have the full balance in your Cash App at the time of purchase. And then there are some products out there that are somewhat similar to this. But the key difference is just the scale. We have 26 million monthly actives. 20% of teens in the United States have a Cash App card.
That's like a pretty crazy thing to think about as we pursue financial tools for the next generation. And so we're going to keep on leaning in here, providing more and more flexibility to our customers. In terms of the secured credit card, there's kind of two different pieces for why folks might be interested in it, why investors might be interested in it. One is like you can make more interchange. The second is, is this like a useful value prop to actually increase the credit score of a given customer? What we've seen when we've tested the second part of that is they don't really work. It's not really like a very good, reliable way to help you build your credit. And so the product that we talked about at Investor Day I'm extremely excited about, which is the Cash App Score.
So we have a score for every single one of our customers. It updates basically in real time. And we think we have the ability not only to provide that transparency to customers, which will drive positive behavior for Cash App, but also there's an opportunity to actually bring that score externally and allow our customers to better participate in the economy, maybe in places where we don't currently play. We don't have a mortgage product right now. We don't have an auto lending product right now. We think that that's probably a much better strategy to actually increase credit access and creditworthiness in the U.S. And then we can figure out however we choose to monetize and increase our monetization rate over time. We have tons of options.
All right. Perfect. Well, that was a great segue. You mentioned the scoring system. So let's talk a little bit about Block's unique underwriting model. And this was definitely center stage at the Investor Day and covered quite well. Also, I'm sure many investors have seen, but you also published a white paper earlier this year called Block's Modern Approach to Credit, which I think covers a lot of these topics. But maybe you could hit some of the key points and then just some of what makes the model different that could kind of help you absorb various ebbs and flows of the economy, if you will.
This is one of the areas that I spend a lot of time on personally and I'm really passionate about. The headline is that the consumer credit model in the U.S. is just fundamentally broken. The technology has evolved over the past 30 years, but the concept of the credit score has not. And so the way in which a given consumer is traditionally being underwritten is it's using a subset of data and it's using really lagged data, and then it updates very infrequently. This doesn't make sense to us. And so the score that we've built is based on all of the signals we have about a given consumer. And critically for us, this is not just Cash App data. It's also Afterpay data. It's also buyer data on the Square side.
We have one of the most incredible data sets on financial and economic activity for a majority of Americans. I think that that's pretty incredible. We then update that score basically in real time. So if you, let's say you go into overdraft coverage or you have a failed transaction, you can see your score decrement and we're giving you the ability to kind of change your behavior to improve your score. I think when you couple that with just world-class team, Brian Bowen spoke at Investor Day, Juan Hernandez, who's our head of underwriting, just absolutely world-class team on the machine learning side who's doing our underwriting, plus the short duration of the loans, we just feel incredibly good about this business and this product line.
To the extent that there is some downturn or some sluggishness in the U.S. economy, one, we're able to react so quickly because of the short duration. But then two, we're actually able to observe this incredibly quickly. We actually have a real-time minute-to-minute read on the U.S. economy because we have so many sellers who are processing payments. We have so many consumers who are using the Cash App Card. All of the things that we saw around the tariff tantrum or when COVID hit, it's like we saw that six weeks before retail sales or six weeks before PCE. And so you can imagine how we flow that through into our underwriting model. It's not just a deep understanding of who our consumers are and their creditworthiness based on the unique data we have.
It's also a near real-time understanding of what's happening with the consumer more broadly in the U.S.
All right. Excellent. We've got a little bit over five minutes left. What we're going to do is we're going to try and tackle Neighborhoods, and then we're going to move into some of the incremental margins in the guide. And we're going to wrap up with the guidance philosophy. All right. Let's go to Neighborhoods. So this was another big highlight of the Investor Day. So bringing the two ecosystems together, Square and Cash App. You talked about many of the value propositions, which is the two sides of the merchant and the consumer. You have the two-sided network, stored balances, network-wide rewards, first-party online ordering, target marketing. The list goes on. Let's talk about the value that gets delivered to both the merchant and to the consumer and what this means for Block.
I see Neighborhoods as the most important thing for the next five years. It's basically, I think, the third chapter for Block. So the first chapter for Block was Square. I think the second chapter was hatching, nurturing, and scaling Cash App into what it's become today. When I joined Cash App, there was no gross profit. Now a majority of Block's gross profit comes from Cash App. And then I think Neighborhoods is kind of this third chapter. The basic setup is that what sellers are getting is the ability to have an enterprise-grade app. It happens to be an applet within Cash App, but that's hugely valuable for a seller. It allows them to market to their customers. It allows them to do loyalty and rewards and discounts and the like, all without having a tech team. On the consumer side, what consumers are getting is rewards.
They're getting local cash, and they're able to then use that cash in the local economy. They're also getting a seamless, incredible way to check out that's built kind of natively into an app that they're already using, which is pretty unique versus trying to hatch this buyer network from scratch, which is quite hard to do. In terms of the business impact, I see this flowing through in a number of ways. On the seller side, what we're expecting is higher win rates, better acquisition, better retention, less churn. And this is already happening. The reason we won Bluestone Lane was Nick and I went and talked about neighborhoods and how incredible it's going to be and how it can drive your business forward. On the Cash App side, I think that there's going to be a huge tailwind on the active side.
We're basically turning tens of thousands, hundreds of thousands of points of sale into a cross-sell or into an upsell for Cash App. So that's going to be a meaningful tailwind. And I think also the buyer base there is not necessarily going to be identical to our current customer base. And then obviously, from Block's perspective, we're monetizing on the seller side. We're monetizing on the consumer side, but we're also able to do really innovative, creative things in terms of the payments and how we're routing that, whether it's on Bitcoin or it's on a Stablecoin or it's on a ledger, however we choose to do that. So this is really the thing. It's the third pillar of the overall strategy, but I think Neighborhoods really is the thing for the next five years.
All right. Excellent. We're going to wrap it up. I'm just going to combine these two into one, but we're going to talk a little bit about the incremental margins in the guidance period. So implied in the guide was that those incremental margins would be reaching the 50% plus level as we get out to 2028. And I think it would just be helpful to let investors know what kind of confidence you have in that, what are some of the main drivers of allowing that 50% plus incremental margin to happen. And then in the interest of making this a two-for-one, we'll go with the guidance philosophy. So there was a little bit of a change earlier this year, and I think it would be a good use of time just to reiterate how the company thinks about giving guidance to the investment community.
Sure. So on the guidance philosophy side, we want to take a prudent approach to our guidance. And we've been consistent this entire year. We also don't bake in specific kind of economic scenarios to the upside or the downside. So we're not kind of trying to forecast when a recession might hit. We're also not trying to forecast if tax refunds should be way larger this year or how Trump accounts are going to flow through or if there's like a kind of tariff-related dividend or stimulus check. And so we kind of have a base case of macro assumptions that we use. To some extent, we can think about our business as an attach rate onto what's going on in the U.S. economy, plus all the benefits you get from product, plus all the benefits you get from distribution and marketing.
And we always want to take a really deliberate and prudent approach to how we're thinking about guidance. In terms of incremental margins, we have a strong track record of having very high incremental margins. So I think the proof is in the pudding. I think I'm talking a lot about all of the products that we're planning on launching more from a customer perspective and a product development perspective, but you can see how things like Neighborhoods and MoneyBot and ManagerBot and Cash App Green and Bitcoin revitalization and serving FSR, like how all of these things ultimately flow through to higher incremental margins. And I think I have an extreme amount of confidence that we're going to execute. That's our main focus every day. It's not investor meetings. It's just executing and shipping great things to customers.
All right. Well, Owen, I have to say on behalf of my team and all of UBS, it really is a pleasure having you here, second year in a row on stage. A pleasure doing this with you. And again, a special thanks to Nikhil, Katie, Janina, the whole team at Block for both a great Investor Day and for taking the time to be with us here in Arizona. Thank you.
Thanks so much, Tim. Appreciate it.