Block investors have been looking for signs that the company’s reset is doing more than lowering costs, and Bank of America says the first quarter gave them a stronger case to consider.
In a Bank of America note provided to TheStreet, analyst Matthew C. O’Neill maintained a Buy rating on Block and kept a $100 price objective after the payments company posted a stronger first quarter than the bank and Wall Street expected. The call implies 33.6% upside from the $74.85 share price listed in the note.
Block’s latest quarter beat expectations
Block, the parent company behind Square, Cash App, Afterpay, TIDAL, Bitkey, and Proto, has built a business across seller tools, consumer finance, payments, buy-now-pay-later services, music, and bitcoin-related products. The company says those platforms are tied to its broader goal of building technology for economic empowerment.
The company’s first-quarter report gave BofA more confidence that the operating reset is beginning to show up in the numbers. Block said gross profit rose 27% year over year to $2.91 billion, while adjusted operating income climbed 56% to $728 million and adjusted diluted earnings per share rose 52% to 85 cents.
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BofA’s note, said Block beat expectations across gross profit, adjusted EPS, and adjusted operating income. The bank said gross profit came in at $2.90 billion, above its $2.81 billion forecast and the Street’s $2.80 billion estimate.
Adjusted EPS of 86 cents also topped BofA’s 64-cent estimate and the Street’s 68-cent estimate, while adjusted operating income of $727 million came in ahead of BofA’s $708 million forecast and the Street’s $712 million estimate. For BofA, the size of the beat was important, though the quality of the improvement may matter more for the stock.
BofA sees Block’s reset gaining traction
The main reason BofA stayed bullish is tied to Block’s structural reset, which followed a major workforce reduction and a sharper focus on artificial intelligence, efficiency, and faster product development.
Block reported a first-quarter GAAP operating loss of $172 million, including $852 million in restructuring and other charges tied to organizational changes and legal contingencies. The company also reported record adjusted operating income and record adjusted EBITDA of $1.0 billion, giving investors a cleaner view of how the underlying business performed after those charges.
BofA said the first quarter showed better execution, clearer accountability, and stronger productivity across the company. In the note, O’Neill pointed to management commentary showing production code changes per engineer have increased more than 2.5 times since January, while more than 90% of code changes are now AI reviewed.
The note also highlighted improving quality metrics, including incident rates that are down more than 70% year over year and more than 40% sequentially. Those details support BofA’s view that Block’s reset is creating measurable operating improvements, rather than relying only on expense cuts.
Cash App remains a major part of the story
Cash App was another major piece of BofA’s bullish argument, especially as investors watch whether the platform can deepen engagement and improve monetization.
Block said Cash App gross profit grew 38% year over year in the first quarter, while Cash App Commerce Enablement volume growth accelerated to 18%. Consumer lending origination volume grew 82%, driven by Cash App Borrow, where origination volume rose 175% and risk loss performance remained healthy.
BofA also pointed to deeper banking engagement inside Cash App. The note said primary banking actives grew 18% year over year to 9.7 million, while Cash App actives increased roughly 4% year over year in March, marking the fastest growth pace in about a year and a half.
Block also raised its full-year outlook after the quarter. The company now expects $12.33 billion in 2026 gross profit, adjusted operating income of $3.34 billion, and adjusted diluted EPS of $3.85.
Macro risks still hang over Block stock
BofA did account for the risks around Block, including rising competition as the company moves upmarket and expands internationally, pressure in Cash App, broader macro weakness for small and medium-sized businesses, and concentration in Cash App revenue and gross profit streams.
Those risks help explain why BofA lowered the multiple used in its price objective to 19 times from 20 times, even as it kept the $100 target. The bank said the lower multiple reflects ongoing macro uncertainty, while higher earnings estimates helped offset that pressure.
BofA raised its 2026 EPS estimate to $3.99 from $3.73 and its 2027 EPS estimate to $5.08 from $5.07. For investors, the bank’s call suggests the debate around Block stock is shifting toward whether stronger productivity, improving margins, and healthier Cash App trends can keep supporting a higher earnings profile.
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