Block (SQ) Q3 2025: Cash App Borrow Originations Soar 134%, Powering Engagement Flywheel

2025-11-06 | By EarningsIQ Research

Block’s Q3 revealed a decisive inflection in Cash App Borrow originations, up 134% year over year, fueling both direct profit and broader ecosystem engagement. Square’s upmarket push and field sales expansion delivered new volume momentum, even as operational cost headwinds linger. With AI-driven products scaling and a robust lending engine, Block enters Q4 with accelerating profit growth and a sharpened focus on high-value users and ecosystem density.

Summary

• Lending Engine Drives Engagement: Cash App Borrow’s surge is deepening user retention and monetization.
• Upmarket Seller Wins Accelerate: Square’s field sales and product suite are capturing larger merchants and international share.
• AI and Ecosystem Integration: New AI tools and unified platform moves are unlocking operational leverage and cross-sell potential.

Performance Analysis

Block’s Q3 showcased a step-function increase in ecosystem velocity, with gross profit up 18% year over year and adjusted operating income expanding despite aggressive reinvestment. Cash App delivered standout performance, with gross profit growth accelerating to 24% year over year, underpinned by a 134% surge in Borrow originations and robust engagement metrics: monthly actives reached 58 million, and gross profit per active climbed 25% to $94. Primary banking actives rose 18% to 8.3 million, highlighting success in deepening user relationships beyond peer-to-peer payments.

Square’s results were also notable, with gross profit up 9% and GPV (gross payment volume) up 12% year over year, driven by strength in food and beverage, mid-market sellers, and international expansion. Field sales and self-onboarding channels both delivered record new volume additions, and upmarket seller GPV grew 20%. However, Square’s gross profit margin faced a 2.6 percentage point headwind from a strategic processing partner shift, a drag expected to abate by Q2 2026.

• Cash App Borrow Expansion: Originations grew 134% YoY, with net margins at 24% and loss rates below 3%.
• Field Sales Scaling: Over 100 field reps now deployed, with sales-led new volume added (NVA) up 28% YTD and expected to surpass 40% in Q4.
• AI-Driven Productivity: AI tools in both Cash App and Square are driving cost efficiencies and product velocity, with company-wide adoption of internal AI platform Goose.

Block’s ability to compound engagement, lending, and AI-driven automation is translating into durable top- and bottom-line growth, setting the stage for continued margin expansion and customer base densification.

Executive Commentary

Strategic Positioning

1. Lending as a Core Ecosystem Flywheel

Cash App Borrow is now a central driver of both direct profit and user engagement, with origination growth translating to higher inflows, retention, and card spend. The internal Cash App credit score, leveraging AI and real-time data, enables responsible risk expansion and creates a competitive moat in serving underbanked segments.

2. Upmarket and International Seller Expansion

Square’s field sales and self-onboarding channels have both scaled materially, with field reps exceeding 100 and international GPV up 26%. Product enhancements—like multi-channel menu management and AI-powered order automation—are resonating with larger sellers and driving record new volume addition.

3. AI Integration Across Products and Operations

Block’s internal AI platform Goose is now embedded across roles, boosting development velocity and cost leverage. Externally, Square AI and forthcoming Cash App AI features are positioned as virtual assistants (COO for sellers, CFO for consumers), aiming to automate complex workflows and personalize user journeys, thus increasing stickiness and upsell.

4. Unified Platform and Cross-Sell Leverage

Block’s vertical integration—owning hardware, software, payments, and banking—enables rapid product rollout and cross-ecosystem promotions, such as Neighborhoods on Cash App, which connects sellers with the consumer network. This integration is increasingly a differentiator versus point solution competitors.

5. Capital Allocation and Shareholder Returns

Block repurchased $1.5 billion in stock YTD and signaled continued buybacks as cash generation accelerates. Management plans to outline capital allocation priorities at the upcoming investor day, balancing reinvestment with shareholder yield.

Key Considerations

Block’s Q3 marks a convergence of lending scale, upmarket merchant traction, and AI-driven operational leverage, but several factors will determine the durability of these gains through 2026:

Key Considerations:

• Borrow Loss Rates Remain Below Target: Current sub-3% loss rates are critical to sustaining lending expansion and margin profile.
• Processing Cost Headwind Lingers: The 2.6 percentage point drag on Square gross profit will persist until Q2 2026, muting near-term margin upside.
• Field Sales and Self-Onboarding Balance: While field sales drive upmarket wins, 70% of new volume still comes from self-onboarding, preserving cost efficiency but requiring continued product-led growth.
• AI Adoption as a Differentiator: Internal and external AI tool deployment is already impacting velocity and cost, but competitive advantage will depend on execution and user adoption rates.
• Capital Allocation Flexibility: With material buybacks underway, investor focus will turn to management’s capital return versus reinvestment priorities at investor day.

Risks

Block’s lending growth exposes the business to credit cycle risk, especially if economic conditions deteriorate or underwriting models underperform. Processing cost headwinds and competitive pricing pressures in merchant acquiring could limit near-term margin expansion. Regulatory scrutiny on BNPL and banking products remains an ongoing risk, as does execution risk in scaling AI and cross-sell initiatives.

Forward Outlook

For Q4 2025, Block guided to:

• Gross profit growth of over 19% YoY, reaching $2.755 billion
• Adjusted operating income of $560 million, with margin expansion to 20%

For full-year 2025, management raised guidance:

• Gross profit of $10.243 billion, up more than 15% YoY
• Adjusted operating income of $2.056 billion, up nearly 28% YoY

Management highlighted several factors that will shape the outlook:

• Continued acceleration in Cash App actives and lending engagement
• Record new volume addition from both field sales and self-onboarding channels
• Ongoing investments in AI and product velocity, with more detail to come at investor day

Takeaways

Block’s Q3 results confirm a re-acceleration in both consumer and seller ecosystems, with lending and AI as central levers.

• Lending and Engagement Flywheel: Cash App Borrow’s expansion is driving not just direct profit, but also higher retention, inflows, and card spend across the ecosystem.
• Seller Upmarket Push Gaining Traction: Field sales and product upgrades are enabling Square to capture larger merchants and international share, with record new volume additions and stable margins despite cost headwinds.
• AI and Platform Integration as Moat: Internal and external AI tools are improving both operational efficiency and customer experience, while unified platform moves like Neighborhoods and product tiering are enhancing cross-sell and ARPU.

Conclusion

Block’s third quarter marks a pivotal moment in scaling its lending engine and AI-driven operations, enabling both margin expansion and ecosystem densification. With robust user growth, upmarket merchant traction, and a disciplined capital return framework, Block is positioned for continued compounding into 2026—though execution and credit discipline will remain central watchpoints.

Industry Read-Through

Block’s results signal that lending-led engagement, AI-driven automation, and unified platform strategies are now table stakes in fintech and payments. Competitors relying solely on payments or point solutions risk losing ground to integrated ecosystems that can cross-sell, personalize, and automate at scale. The rapid scaling of BNPL and embedded lending highlights a broader shift toward consumer finance platforms, while field sales and upmarket product upgrades are increasingly necessary to win larger merchants. AI’s tangible impact on both cost and growth is a warning shot for legacy providers: automation and proactive user engagement are now critical competitive levers beyond simple workflow digitization.

SQ Technology Fintech Lending Payments Artificial Intelligence BNPL Field Sales