Copyright Benzinga
Block Inc (NYSE:XYZ) delivered a strong third quarter, even as investors reacted negatively to temporary headwinds tied to its new processing partner agreement. The company's solid performance was driven by robust growth across both its Cash App and Square businesses. BTIG analyst Andrew Harte maintained a Buy on Block with a price target of $90. • XYZ is encountering selling pressure. Get the latest updates here. Harte said investors overreacted to Block shares falling 11% after hours, despite the company reporting a solid third quarter with both revenue and earnings beating expectations and management raising full-year 2025 guidance. The analyst attributed the stock pressure to a 3% gap between Square's gross payment volume (GPV) growth of 12.2% and gross profit (GP) growth of 9.1%, a discrepancy he said was already signaled in earlier guidance. Harte explained that most of the gap — about 2.6 percentage points — resulted from an updated agreement with Square's processing partner, which temporarily increased costs but also improved operational flexibility, freeing up cash that Block can now use to earn interest income. Another 0.4% came from hardware-related headwinds tied to tariffs and discounts. Square's focus on acquiring larger merchants naturally results in lower take rates but stronger long-term customer value, as per the analyst. Also Read: Block Inc To Hit ‘Rule Of 40’ By 2026 Despite $70 Million Party, Says JPMorgan While investors reacted negatively to the extended timeline of this processing partner headwind — now expected to persist through the second quarter of 2026 instead of fading by late 2025 — Harte said the trade-off should yield long-term financial benefits and improve cash flow. The analyst highlighted Block's strong execution, with third-quarter gross profit rising 18.3% year-over-year to $2.66 billion, exceeding expectations. The Cash App business led the outperformance, growing 24.4% year-over-year and outpacing analyst forecasts. Square's gross profit grew 9.2%, only slightly below projections, while adjusted operating income reached $480 million, beating both internal and Street estimates. Harte added that Block continues to post accelerating U.S. and international growth, reflecting solid demand across its ecosystem. The analyst expects the company's upcoming Investor Day to showcase how Square and Cash App are scaling as distinct yet complementary growth engines. Harte projected fourth-quarter revenue of $6.29 billion and EPS of 73 cents. XYZ Price Action: Block stock is down 8.71% at $63.72 at publication on Friday. Read Next: AMC Networks Profit Plummets 80%, CEO Says Streaming Is Now ‘Largest Revenue Source’ Photo: Shutterstock
