block (XYZ +8.78%) recently announced its first quarter earnings, and the numbers were very strong overall. Gross profit increased 27% year-over-year, including a 38% increase in business on the Cash App side. The company posted an adjusted operating margin of 25% and customer engagement metrics were very strong.
In addition, Block raised his full-year outlook to “reflect the strength we are seeing across the business.” Management now expects adjusted EPS to grow an impressive 62% year-over-year, driven by strong gross profit growth and improved margins.
To be clear, all the major numbers looked great. But the most important part of this story goes beyond the headline numbers.
Image source: Getty Images.
Here it is why Block performance is improving
In short, Block sees AI not just as a productivity tool or a feature that can improve its products. Management believes AI is the backbone of the company, both internally and in products.
You may remember that in February, Block announced it would cut its workforce by nearly half. This is one of the most dramatic layoffs of the AI era so far. CEO Jack Dorsey said at the time that AI “fundamentally changes what it means to start and run a company.”
Today’s changes
(8.78%) $6.16
current price
$76.30
Key data points
Market capitalization
$42 billion
daily range
$72.52 – $77.16
52 week range
$48.21 – $82.50
volume
409K
average volume
7.8M
gross profit
42.26%
Now, in his first-quarter letter to shareholders, Dorsey wrote, “As of mid-April, manufacturing code changes per engineer have increased more than 2.5 times compared to January.” He went on to say that the incident rate after the production code change was reduced by more than 70% compared to the first quarter of 2025. So Block’s engineers aren’t just more productive, they’re also able to do their jobs better thanks to AI tools.
Increase engagement with proactive AI
This is the context from the internal side of the AI implementation. But Block also does a great job leveraging customer-facing AI products. And they go far beyond the chatbots and AI assistants that other fintech companies have. As Dorsey said in his letter to shareholders, “We believe the next step is proactive AI.” Block deploys two very promising examples of proactive AI products.
On the Cash App side, the company’s Moneybot tool detects patterns such as forgotten subscriptions and spending drift, helping customers identify them and take action. On Square’s side, the company’s Managerbot helps sellers find and fix staffing inefficiencies, vendor pricing issues, and other costly mistakes.
Recently rolled out across the Cash App universe, Moneybot was used by over 1 million Cash App customers in the first week alone. And the company found that customers who follow one of the actions Moneybot suggests are five times more likely to return to the product. Managerbot has shown similarly impressive engagement results.
Why is it important for investors?
This is the point. Proactive AI drives meaningful engagement on Block’s platform and is a huge catalyst for customer retention. And these tools will become even more powerful as the company’s AI models learn from customers’ financial data.
Dorsey summed it up well on the earnings call, saying, “We believe we’re evolving into an intelligence company…We’re taking a deep dive into understanding our sellers and Cash App customers to give them exactly what they need at the right time.”
Finally, keep in mind that many of Block’s AI strategies are still in their infancy. For example, Moneybot and Managerbot have both just been deployed to users and have not yet been integrated into your business. And it will take several quarters for the internal efficiency benefits to fully show up in the numbers.
