Block plunges 20% as Cash App miss triggers downgrades

Block shares were on track for their second-worst day Friday, plunging more than 20% as investors digested a brutal quarterly report and a wave of analyst downgrades centered on one issue: Cash App.

The first-quarter earnings miss rattled Wall Street, prompting multiple firms — including Wells Fargo, Seaport, BMO, and Benchmark — to downgrade the stock overnight. Many flagged fresh concerns around stagnant Cash App user growth, muted consumer demand, and a soft macro environment that may weigh on monetization.

"Stagnation in the number of active users of the app is even more concerning than users' reduced spending," Benchmark wrote in its note, downgrading Block to Hold.

The financial services company missed across the board — on revenue, gross profit, and payment volume — and slashed its full-year guidance, citing macro uncertainty, weaker consumer spending, and lower-than-expected inflows during what's typically a strong tax refund season.

"I just don't think we were focused enough and had enough attention on the network and the network density, and that is our foundation," CEO Jack Dorsey said on the earnings call. "We of course want to deepen engagement with our customers through banking services and Borrow, and I have no doubt we will ... but at the same time, we need to make sure that we continuously grow our network, and that starts with peer to peer."

Cash App generated $1.38 billion in gross profit in the first quarter, up 10% from a year earlier, but shy of the $1.42 billion StreetAccount consensus. Monthly actives remained flat at 57 million — and inflows rose just 8%, despite new features like Afterpay on the Cash Card and broader efforts to position Cash App as a full-fledged banking alternative.

Block 5 day stock chart

Wells Fargo called out "numerous Cash App monetization red flags," while Seaport pointed to several consecutive quarters of negative GPV growth. Even Morgan Stanley, which reiterated its Overweight rating, called the Cash App miss "surprising" — though it highlighted better-than-expected momentum in the Square seller business, particularly in international markets.

BMO downgraded the stock to Market Perform. Wells Fargo said it's unwilling to "lay out for the second half Hail Mary," moving to Equal Weight. Seaport downgraded to Neutral, writing: "Will the real Jack Dorsey please stand up?"

Still, some maintained optimism, with Bank of America reiterating its Buy rating, calling the stock undervalued, and Morgan Stanley saying it was an attractive near-term entry point.

Block's turnaround plan hinges on lending. The company says Cash App Borrow — now approved by the FDIC to originate loans through its bank subsidiary — will double the number of eligible users and improve margins by bringing servicing in-house.

Marketing spend is also expected to jump 50% in Q2 as Block looks to reaccelerate growth in the back half of the year.

"We are not sufficiently confident in the likelihood of such a rebound to recommend buying the stock on weakness," Benchmark wrote.

Meanwhile, rival Venmo is showing signs of momentum.

Parent company PayPal reported a 20% revenue jump for the app in Q1, driven by increased adoption of Venmo's debit card, instant transfers, and growing volume at checkout. While PayPal didn't disclose an exact revenue figure for Venmo, it said monetization per user is improving — the result of a clear push to embed Venmo deeper into e-commerce flows.

Two very different strategies are now unfolding: Cash App is leaning deeper into lending and banking, while Venmo is chasing spend at checkout. But the goal, however, is the same: Owning the consumer's wallet.

Right now, Venmo appears to be gaining ground, while Cash App is regrouping.