Episode Details

Block, Inc. (XYZ) Q2 2026 — Gross profit $3,166M UP 25% vs its own $3.04B guide. Adjusted EPS $1.02 UP 65% vs an $0.871 bar. GAAP EPS $0.15 DOWN 83%. Record 27% adjusted operating margin. FY26 guide RAISED to $12.51B and $4.02 - but the implied second half went up only $54M of gross profit and $6M of operating income. Stock -4.75% to $80.20. Block (formerly Square, ticker SQ, now XYZ) beat and raised, and the stock fell 4.75%. Here is why: the full-year gross profit guide went up $180M and $126M of that was the quarter already banked, so the entire second half rose $54M - 0.85%. On adjusted operating income the raise was $130M against a $124M beat: the back half moved $6M. And gross profit growth goes 27%, 25%, a guided 18%, and an implied 15% in Q4 - the Q3 guide of $3.13B is BELOW what Q2 just printed. The record 27% margin came from a workforce cut of more than 40%. THE CALL: HOLD (3/5, THE MARKET GOT THIS ONE RIGHT) — base-case value ~$82.0 vs ~$80.2 today. KEY METRICS: - CALL: HOLD 3/5, fair value ~$82 vs the $80.20 close. Street $95.08 avg (35 analysts). Bull $113, bear $45. - GROSS PROFIT $3,166M +25%. Cash App $1,973M +31%, Square $1,160M +13%. Adjusted EPS $1.02 vs an $0.871 bar. - THE RAISE IS THE QUARTER: FY gross profit +$180M, $126M already banked. Implied H2 +$54M. Operating income H2 +$6M. - GROWTH DECELERATES 27% to 25% to a guided 18% to an implied 15%. Q3 guide $3.13B is below Q2's $3,166M print. - BITCOIN IS 29% OF REVENUE AND 2.3% OF GROSS PROFIT ($1,894M revenue, $72M profit). DOJ accrual $526M, may exceed. What to watch: UP: Cash App monthly actives back above 60M, a September quarter that beats the $3.13B bar without giving it back, or a DOJ settlement inside the $526M accrued. BEAR: transaction and loan losses above 20% of gross profit, actives below 59M, or a 2027 guide with gross profit growth starting with a one. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.