Q2 2025 Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the Block Second Quarter 2025 Earnings Conference Call. Today's call will be 45 minutes. I would now like to turn the call over to your host, Matt Ross, Head of Investor Relations. Please go ahead.

Hi, everyone. Thanks for joining our second quarter 2025 earnings call. We have Jack and Amrita with us today. We will begin this call with some short remarks before opening the call directly to your questions.

During Q&A, we will take questions from conference call participants. We would also like to remind everyone that we will be making forward-looking statements on this call. All statements other than statements of historical fact could be deemed to be forward looking. These forward-looking statements include discussions of our outlook, strategy and guidance as well as our long-term targets and goals.

These statements are subject to risks and uncertainties, including changes in macroeconomic conditions. Actual results could differ materially from those contemplated by our forward- looking statements. Reported results should not be considered an indication of future performance. Please take a look at our filings with the SEC for a discussion of the factors that could cause our results to differ.

Also note that the forward-looking statements, including earnings guidance for 2025 discussed on this call, are based on information available to us and assumptions we believe are reasonable as of today's date. We disclaim any obligation to update any forward- looking statements, except as required by law. Further, any discussion during this call of our lending and banking products refer to products that are offered through Square Financial Services or our bank partners. Within these remarks, we will also discuss metrics related to our investment framework, including Rule of 40. With Rule of 40, we are evaluating the sum of our gross profit growth and adjusted operating income margin.

Also, we will discuss certain non-GAAP financial measures during this call. Reconciliations to the most directly comparable GAAP financial measures are provided in the shareholder letter and our historical financial information spreadsheet on our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. Finally, this call in its entirety is being audio webcast on our Investor Relations website.

An audio replay of this call and the transcript for Jack and Amrita's opening remarks will be available on our website shortly. With that, I'd like to turn the call over to Jack.

Thank you all for joining us. As you all know, we've been talking for several quarters about our focus on increasing product velocity and ramping up our go-to-market investment. This quarter, you can see our work paying off. We're back to growth mode across the company.

We're shipping faster. We're launching new features like Pools in just a few months, and we're accelerating the pace of delivering AI functionality to our customers. In my letter this quarter, I discussed Cash App's scale and impact and our strategy to continue growing by helping our customers manage their financial lives better. We believe the capabilities in Cash App are unique and that no one else can deliver the money app we're building for consumers.

I hope you take a look. And with that, I'll turn it over to Amrita.

Thanks, Jack. We delivered strong results in the second quarter, exceeding our gross profit and adjusted operating income guidance. Gross profit was $2.5 billion, up 14% year-over-year, accelerating from 9% growth last quarter. Adjusted operating income was $550 million, up 38% year-over-year, as we expanded margins to our highest quarterly adjusted OI margin yet, 22%.

Product innovation and go-to-market investments are accelerating across Block. We're delivering more value faster and more efficiently. In the second quarter alone, we launched Square AI, Square Handheld and an updated version of Square Online. We showcased Bitcoin payments on Square, introduced Tap to Pay for Cash App Business powered by Square and rolled out Cashbot, our AI-powered customer support agent.

We released paying monthly for Afterpay single-use payments in the U.S.; new features for sponsored accounts; a new, more personalized offers platform; and we took Cash App Pools from development to pilot in just a few months. In Cash App, gross profit growth reaccelerated to 16% year-over-year in the second quarter. Cash App Card delivered healthy gross profit growth at scale, and BNPL gross profit reaccelerated, driven in part by the increasing attach rates for post-purchase BNPL on Cash App Card, which crossed 1 million monthly actives in July. We began to meaningfully ramp Borrow on Square Financial Services during the second quarter.

Our bank, SFS, now originates the majority of Borrow loans for our customers, and we plan to continue expanding SFS originations throughout the second half of the year. We're also exploring more ways to deepen engagement, including higher Borrow limits for paycheck deposit actives. We believe the combination of assets we have in Cash App is unique and positions us for attractive sustainable long-term growth as an enduring ecosystem. Our strategy is oriented around driving strength in the 4 pillars of our business.

First, we have a scaled peer- to-peer network that drives community connection and Cash App customer acquisition with $218 billion in peer-to-peer volume in the last 12 months. Second, our broad commerce capabilities generated $183 billion in volume in the last 12 months, growing 16% year- over-year or 21% excluding Cash App Business. Third, our banking solutions help millions manage their money. In June, 8 million actives either deposited a paycheck or spent at least $500 across Cash App, and Borrow reached $18 billion in annualized originations.

And fourth, we've enabled millions of actives to buy and sell $58 billion in Bitcoin. For paycheck deposit actives who receive some of their paycheck in Bitcoin, we provide what we believe is the only way to buy Bitcoin with no fees and no spread. Cash App is resonating with the next generation at scale. In June, we had 5 million sponsored teen actives and 1.7 million actives that had graduated from a sponsored account to an individual Cash App account.

Engagement with sponsored teen actives is strong with nearly 80% attach rate to Cash App Card and over 25% attach rate to Cash App Pay. Simply put, Cash App meets the needs of this generation and delivers tools to help them run their financial lives. Turning to Square. Year-over-year GPV growth accelerated to 10% in the second quarter, and we delivered 11% gross profit growth, which included a network remediation payment we had previously discussed at the end of last year.

We observed strong GPV growth in food and beverage, and retail, up 15% and 10%, respectively. International GPV growth accelerated to 25% year-over-year as we continued to expand distribution across sales and partnerships. We are changing perceptions of Square among new and existing customers, a testament to the products we've launched in the past year and the investments we're making across marketing, field sales and partnerships. We're focused on winning the quick-serve restaurant market, and we're delivering with customer wins like Colectivo Coffee; Shane's Rib Shack; and Ben's Soft Pretzels, a 60- location seller that we're thrilled to welcome back to Square.

These amazing sellers are category leaders in their communities, and we're honored they choose to partner with us. Beyond winning QSR, we're -- we continue to see strong performance from our field sales team with an estimated 5- to 6-quarter payback on recent sales cohorts. In the second quarter, we delivered our highest ever new volume added and our strongest growth in new volume added since the third quarter of 2021. Year-to-date, forecasted new gross profit added outpaced forecasted new GPV added as we grew upmarket in the U.S., signaling healthy pricing and product attach rates. We continue to see high ROIs as we scale field sales, and we expect to continue to ramp sales personnel aggressively to broaden our distribution footprint further.

We're also seeing early traction with our independent sales organization investments and expect to continue to scale that distribution channel further in the quarters ahead. Turning to guidance. We're raising our full year guidance and our expectations for the back half of the year. Our Q3 guidance and implied Q4 guidance call for continued acceleration in gross profit growth.

For Q3, we expect gross profit of $2.6 billion, growing 16% year-over-year. We expect adjusted operating income of $460 million or 18% margin. We expect to exit the year with gross profit growth of 19% and over 20% adjusted operating income margin, positioning us well for 2026. As we look at Q3, there are 2 nuances to call out. First, we expect to see an adjusted operating income margin of 18% in the third quarter compared to 20% plus margins in the other quarters this year.

This is due primarily to risk loss growth as we expand Borrow. We are investing behind a product that has strong unit economics on incremental growth, and we expect loss rates to stay within historical ranges. The timing of our expanded go-to-market initiatives also contribute to Q3 margin dynamics. Second, for Square, we expect to deliver low double-digit GPV growth in the third and fourth quarters, accelerating modestly from the 10% growth we delivered in the second quarter.

We expect third quarter gross profit in the high single-digit range and fourth quarter growth to track roughly in line with GPV growth. Square's third quarter gross profit growth is impacted by a few dynamics, including our decision to increase operational flexibility at a processing partner, which modestly increases processing costs and further investments in hardware as a successful go-to-market driver for Square. We continue to be encouraged by the strong results we see in our go-to-market efforts for Square with profitable volume growth and a return to share gains in recent quarters. For the full year, we're raising gross profit and adjusted operating income guidance to reflect our strong execution.

We expect full year gross profit of $10.17 billion or over 14% year-over-year growth. We expect adjusted operating income of $2.03 billion or 20% margin, expanding margins 2 percentage points year-over-year despite the meaningful go-to-market investments we're making to grow our business. Our financial results and our updated guidance are a reflection of our ability to deliver value to our customers. We're honored to have been added to the S&P 500 this quarter, and we want to welcome new investors joining us on this journey.

We believe we have the best combination of assets in the industry to deliver on our purpose of economic empowerment. And we're excited to share more about our long-term road map at our Investor Day on November 19. I'll now turn it back to the operator to start the Q&A portion of the call.

[Operator Instructions] Your first question comes from the line of Tien-Tsin Huang from JPMorgan.

Tien-Tsin Huang: Really impressive growth here in the quarter and the outlook. So I just want to maybe check on conviction and visibility, of course, into the second half acceleration that you're talking about. I think, Jack, you mentioned you're shipping product faster. So given what you've seen and observed, I'm curious, are you more bullish in certain areas versus what we last talked about? And where might you be a little bit more cautious with more work to do than, say, 90 days ago?

Yes. I think this is all a function of our shipping velocity. And I think the biggest indicator of this is of the recent Pools launch. It's a pretty complicated feature just to do on network, and the team did an amazing job not just doing that within ideation to execution and shipping to customers within 3 months but also made it possible for us to go out of network as well, meaning that you can create a pool and you can invite friends who don't -- are not on Cash App currently, and they can use Apple Pay or Google Pay to contribute to the pool and ideally see that functionality in the utility and then sign up themselves.

So these are the sorts of features that we're now able to ship much faster. And it directly contributes to our overall network growth, which contributes to our overall virality and really, really strengthens what made Cash App, Cash App in the first place, which is this inherent network effect that we have. The products we can build on top of that just get stronger because of it. And it's -- and then it's all a function of us being able to show our customers everything that Cash App has to offer in the ecosystem.

But I've never been more confident of our ability to do that better than I am today. It's a function of our focus but also the tools we have access to today with all of our AI coding tools. Goose is being used by nearly everyone in the company. It's accelerating our developers.

It's accelerating our designers. It's allowing us to experiment a near 0 cost so that we can actually get to the right answer much faster, and we can get the customer feedback much faster, too. So we can double down and pull the thread on what resonates with people. So I'm super excited and super bullish on our ability to ship faster, which will make every single thing about Cash App and also Square that much better and more usable.

Yes. And I'd just add, Tien-Tsin, we saw a lot in the second quarter that gave us some healthy signs and real encouragement around the products that are the key drivers of growth for us and the key drivers of acceleration in the second half. And that's what gave us the conviction to raise our guidance by more than the beat in 2Q to raise the back half of the year across both gross profit and OI. What our guidance calls for is 2 points of sequential acceleration into Q3 and 3 points further sequential acceleration into Q4. And that's really on the back of 4 key things where, again, we saw strong data points in the second quarter.

First, on the strength of Borrow, we now have 6 million monthly actives on Borrow. We're expanding eligibility, increasing limits in a responsible way with healthy loss rates and seeing enhanced unit economics as we transition that migration from a partner bank to our own bank, SFS. Secondly, we're seeing some of the newer products in Cash App, like post-purchase BNPL on Cash App Card, which is the first real integration of Afterpay into Cash App, and Cash App Pay, 2 important commerce products for us really resonate and start to compound more meaningfully. Post-purchase BNPL as of July crossed the 1 million active milestone, which -- and we're really excited, again, about what we're seeing in terms of growth.

If you compare post-purchase BNPL to Borrow at similar points in time, the newer product, which gets to learn from Borrow, is outpacing in terms of attach rates and in terms of loss rates and Cash App Pay now at 7 million monthly actives as of June. Third key driver is Proto. You'll see a lot more at next week's launch event, but we expect Proto to begin contributing to gross profit growth in the second half of the year. And then finally, Square, we're seeing some nice acceleration in the Square business, and we'd expect to exit the year in Q4 with faster GPV growth, which ultimately will compound to gross profit growth over time as well.

Your next question comes from the line of Tim Chiodo from UBS.

I want to dig in a little bit more on Cash Card post-purchase BNPL. So this topic comes up a lot because investors are now very confident in the ramp in Borrow in the second half and the lapping dynamics, those are supportive of gross profit growth heading into at least the first half of 2026 as well. So we're often asked what's the next big product that can help drive the growth in the second half of 2026 and beyond? Of course, there's a long list of items, and many of them are highlighted in the shareholder letter.

But one that stands out is Cash Card post-purchase BNPL. You just mentioned some of the stats, the 1 million, the attach rates, the loss rates. I was hoping you could just elaborate a little bit more on this product in terms of those attach rates and just anything else that can help us to better quantify that opportunity in 2026 and beyond.

Sure. Thanks for the question, Tim. So we released the product in March, and it's been one of the key drivers of growth acceleration for Cash App and also what you saw overall for the BNPL platform. If you look across the second quarter, GMV for BNPL accelerated to 17% on a reported basis, 18% constant currency, up from 13% and 16%, respectively, in the first quarter.

We also saw gross profit accelerate to 22% year-over-year growth, so part -- an accelerating story for BNPL overall. The early signs that we've seen for post-purchase BNPL have been really strong, strong conversion, strong adoption. As I mentioned, we crossed the 1 million monthly actives mark. We also crossed the $2 billion originations run rate mark in July and expect to continue to expand eligibility and increase attach rates as we look at the back half of the year.

As I noted earlier, we're really taking the learnings from Borrow. And as we stack up post-purchase BNPL against Borrow's early trajectory, both in terms of origination volume and margin profile, because we're able to leverage our infrastructure around the Cash App credit score, we've been able to track ahead of where Borrow is and we know that that's become a successful product for us. So we're encouraged about these early signs that we're seeing on BNPL. If I step back and if I think about 2026, obviously, we'll have a lot more to say later in the year and at Investor Day.

But I think about the nascent products that are still ramping, like post-purchase BNPL, which we'd expect to contribute more in '26. Our traditional Pay- in-Four bringing that more into Cash App and seeing that ramp into '26 Cash App Pay, some of the newer products that we've talked about like Tap to Pay on Cash for Business, all these newer products continuing to ramp end of 2026 for Cash App. I'd expect Borrow to continue to be a growth driver for us as well. It's not just about the back half of this year. And there's also, as we look ahead into 2026, compounding effects of these go-to-market investments we're making across each of Cash App and Square.

So there are a number of drivers of growth as we look at '26 that we get excited about. And then most importantly, the key takeaways from this call, as you heard from Jack, is really around product velocity increasing, and so there's even more coming than what we have today.

Your next question comes from the line of Darrin Peller from Wolfe Research.

Nice job. Just one more follow-up on Cash App. I mean, it was obviously strong and accelerated well. Borrow was strong at $18 billion of originations.

But I really appreciate the new disclosure you're giving. I saw 8 million banking actives you define as either 1 of the 2.5 million or 2.7 million direct deposit users, or I think someone's spending $500 per month across Cash App. So that number was up 16%. Can you just touch on that metric a little bit more?

It's a new -- I haven't seen that disclosure before. And how do you see that trending, driving Cash App gross profit even into next year if we're thinking about that the right way? And then I also love to call out on new areas for potential MAU growth on Cash App. So just how has that been trending, too?

Darrin, I can get started on this one. So first, what I would say is what you saw in the letter is that we've continued to experience strong growth on paycheck deposit actives with the 2.7 million that we reported in June. We also added another 100,000 in July, so we're now over 2.8 million, so we continue to compound growth there. But as we have done extensive research to inform our banking strategy, how we think about incentives, how we think about marketing to this customer base, as we did that customer research, we observed that many more people look at Cash App as their primary banking partner than the ones who we are recording in the paycheck deposit active metric.

So that caused us to analyze inflows. We looked at spend levels. We looked at transaction metrics to better understand how our customers are using Cash App. And based on that analysis, we put forward some of the new metrics that you noted in the letter, in particular, looking at a spend threshold as the primacy of a banking relationship.

And that $500 per month threshold, we thought was important. The average debit card spend in the U.S. is about $900 a month. So that would reflect really someone who's, by and large, making Cash App Card top of wallet. And when we look further at the ARPU of these 8 million banking actives, who are either depositing a paycheck or spending $500, first of all, they're growing quickly, up 16% year-over-year.

Second of all, they're deeply engaged. They generated more than $250 in gross profit per active on an annualized basis in the second quarter, which is obviously 3x Cash App's blended $87 ARPU. And on average, they transacted more than 40x across Cash App in June. So we're pretty encouraged about our traction with our banking strategy.

We know that there's millions of people who place their trust in Cash App to be their banking platform. We're going to be doing more. We mentioned testing higher Borrow limits for paycheck deposit actives. You'll also see us testing -- expanding our banking benefits based on the spend thresholds.

So we'll be doing more to bring awareness and incentives around our banking platform.

Your next question comes from the line of Rayna Kumar from Oppenheimer.

Last year, you started to lean a bit more into a Square sales effort. And of course, you've launched a number of new products. Can you talk a little bit about some of the returns you're seeing on these investments and if it's scaling as you expected?

Yes, we're very excited about what we're seeing in the early results of our expanded go-to-market playbook. We are getting ourselves in front of a much wider set of sellers now, and we're starting to see that accrete in terms of market share gains. In particular, from a sales perspective, what we're seeing is strong growth in the first half of this year on new volume added, 20% plus growth rates on new volume added. And we actually expect that growth to more than double in the fourth quarter just on the back of how we're ramping our sales team across both field sales and telesales.

Field sales, which is a newer motion for us, we're seeing an LTV to CAC, which is how we measure returns on investment, at extremely strong rates and paybacks, as I noted earlier, in that 5- to 6-quarter range. So that's what's given us the confidence to continue to ramp, both the field sales teams as well as our telesales teams both in the U.S. and internationally. And the marginal returns of these new hires are very strong, which gives us conviction to continue investing here. So it's that sales motion in concert with our partner motion, where we are seeing -- exceeding our expectations from a partner-driven lead perspective in the second quarter and also newer channels of growth within the partnership world around our first U.S.

ISO partnerships. That's what's driving very strong momentum across our sales channels. And I would also just note the strong growth that we're seeing from an international perspective. That's another place where we think international at 25% GPV growth, 19% gross profit growth in the second quarter is really benefiting from the investments that we've made on the ground with our sales motions.

And I would say even -- the final thing I'll say is that while we've seen really strong sales-enabled growth through both field sales, telesales and partnerships, it hasn't come at the detriment of self-onboarding from what we've seen. We continue to see really strong volumes with our already healthy sort of self-onboard motion as well.

Your next question comes from the line of Trevor Williams from Jefferies.

I wanted to go back to the spread between gross profit and GPV growth in Square. That was a bit narrower than where it was in the first quarter. If you could talk through some of the moving pieces there, I think you had pricing that went in at the end of March, the network incentives Amrita mentioned, just what the offsets to those were? And then for the rest of the year, it sounded like gross profit, a bit below GPV in Q3 and in line in Q4. Just the moving pieces within those 2 quarters and if longer term, we should be thinking about a pretty tight spread between those 2 growth rates.

Sure. I think the main thing that's going on here is a few nuanced near-term dynamics impacting Square gross profit that aren't really a reflection of the underlying strength of the business. Ultimately, what we're focused on is compounding sustainable GPV growth, and we know that, that will accrete to gross profit growth. The key -- one of the key things that we're looking at, we just talked about our sales motion, is that our new profit added from new cohorts of customers is even stronger than new volume added in the U.S., which tells us that our pricing and attach to additional products across our ecosystem continue to be strong as we onboard these new customers.

And again, that will compound over time as we get into '26 and beyond. In the near term, there are a couple of dynamics to point out. So as I mentioned in the interim remarks, we made some changes that increased our operational flexibility at a processing partner. That modestly increased Square's processing costs.

So in the second quarter, we absorbed approximately 2 points of gross profit growth headwind from this shift, which basically offset that network remediation payment that we had talked about earlier. And that's something that we would also expect, as I noted earlier, to impact the third quarter but will -- it's sort of a couple of quarter impact, and we'll lap that as we head into 2026. The second key thing I'd point out is hardware costs. Some of our newer hardware with handheld has seen strong adoption, and it continues to be a great go-to-market new customer acquisition channel for us. So that's one that we want to lean into as we bring new customers into the platform.

So that's another impact from a Q3 perspective. Ultimately, though, we expect to exit the year with gross profit and GPV growth roughly in line with each other and to continue to focus on that cross-sell of more of our products to customers to help them run and grow their business.

Your next question comes from the line of Harshita Rawat from Bernstein.

I want to ask about Cash App user growth. Jack, you talked about focusing more on network density, including the focus on families and teens, and nice to see some of the products like Pools that have come through this quarter. You've also had some marketing campaigns. I guess my question is what other things can you grow -- can you do to grow the network and users at Cash App, the growth of which has stalled in recent quarters.

And then just as a quick follow-up, any comments on Bitcoin mining initiatives in light of the recent deal from CoreWeave and Core Scientific.

Yes. I'll start on Proto and mining. We're going to have some news very, very soon. As Amrita said, we -- this will be as soon as next week.

So we're really excited about everything happening with Proto. I think we've built the best miner out there, and the market is about to see that. We'll be able to provide the most flexible and the most customizable, and we built this entirely with customer feedback all in mind. So we're going to have some really happy customers, and we're going to grow that market and take a lot of market share, I think, in mining.

In terms of Cash App, it's -- just looking deeply at our customer base and our future customer base, we believe that we're building the money app for the next generation, and we think it's a huge opportunity for us. It's fairly untapped. There's not a lot of folks out there doing it very well. Cash App resonates naturally with a younger crowd.

It's cool. It works. It's easy. It has absolutely everything people need.

Our parents are often giving their kids access to it very early, and we plan to really leverage that and make something that is even cooler and even more usable. And Pools is a result of that. We looked at what people are trying to do with their money, and we came up with this concept of multiplayer money. How do you make money to work in a way for multiple people at once?

And just 1 incredible stat is that 60% of adults in the U.S. pool money for something. So we want to make something that worked flawlessly but also allowed people to not have to get people to necessarily sign up for Cash App, that they can actually contribute to the pool using a method they already have, which is Apple Pay or Google Pay, and then see the full utility of Cash App and then sign up themselves because they see it's so easy. So we're looking very deeply at our customers, our future customers. And this goes into the products and the features that we build but also how we market it.

We have some super creative marketing, and that's only going to get stronger and stronger as the year goes on. And the number of features and the number of products that we're going to be able to launch over this year is more than anything we've been able to do in the past because of the technology we have available to us and also the focus and all the reorganization that we did in the recent past. So now it's finally clicking, and we're seeing it in the results as well. And the team is very fired up to just get as much excellent product out there as we can to our customers.

And we're reviewing a bunch of really cool stuff, and all of it has felt like the early days of Cash App when we're building something that felt a little bit impossible, but we made it possible and we made it really cool. And it resonated right way. So that focus will pay off. And I think the days of not shipping are over.

We're only as good and only a function of how quickly we can ship and how quickly we can experiment and how much we can put in customers' hands, and it's never been faster.

And I'd just add, Harshita, that what we're seeing -- a lot of what Jack just talked about, we launched relatively recently between Cash App Pools just over this past week, as we continue to ramp that to more customers, Tap to Pay for Cash App Business also very recently, our marketing campaign, which is a pretty buzzy and innovative way to get the message out to the next generation also sort of over the past months. All this is our execution is speeding up. It's all relatively recent. The early signs that we're seeing on it, maybe not even fully reflective in the 2Q results, but have been extremely encouraging in terms of the metrics that we look at from an actives and active engagement perspective.

So clearly, some early signs of success in reinvigorating network growth in Cash App, and we expect that to start showing results as we head into '26, but that's part of the conviction that we had as we thought about raising guidance in the back half of the year as well just on the execution for some of the very recent product and go-to-market initiatives from a Cash App perspective.

Your next question comes from the line of Dan Dolev from Mizuho.

Really good results. Great job on growing everything, including the Borrow product. I do have a question. We're getting a lot of inbounds on it this afternoon on this topic.

So I did want to understand a little bit better how the Borrow thing is evolving as it gets bigger as part of the business. Maybe, Amrita, can you opine on the gross margin profile in terms of like what percent is it? Is it 100%? And maybe touch on like quantifying the puts and takes on the step-up in losses, again, because we're getting a lot of questions about this.

But overall, great job on growing this and making it a big business.

Dan, yes, sure. Happy to talk more about Borrow. Obviously, performance, very strong this quarter. Origination volumes doubled -- almost doubled year-over-year to $18 billion on an annualized basis in the second quarter and now at the 6 million monthly actives in June, we expect that strength to continue as we roll out Borrow to more states now under the SFS originations.

We also published -- I'd point you towards our investor slides, which outline our annualized net margin or ANM. This is a big metric that we look at to measure the successful performance of the product and the unit economics of the product. What we see there are the strong economics at 24% margins in the second quarter, which is above our 20% margin threshold. Then you see multiple quarters really in that mid-20% range even as we've continued to -- as we continue to ramp Borrow meaningfully.

We also see Borrow, first and foremost, as a strong product on its own but also a key part of the engagement strategy for the Cash App banking strategy that we noted earlier. And we know our customers really value access -- fast access to liquidity. So as we noted, we're going to be testing higher Borrow limits for our paycheck deposit actives and explore other ways that we can use Borrow to drive engagement across Cash App. On the loss point, taking a step back from Borrow specifically, the core asset that we're leveraging to power Borrow and also post-purchase on BNPL on Cash App Card is Cash App's internal credit score.

It's our internal custom credit scoring mechanism, incorporating data across our customers in how they're using Cash App to inform an underwriting decision and eligibility for our customers. It's continuously updated, absorbs data across Cash App's ecosystem to assess basically where we can underwrite our customers, whether we can and then at what credit limit we can. And we've put out a white paper recently that talks to this. But as we look at our credit model, our internal credit model can approve 38% more customers compared to VantageScore at the same loss threshold, which means that we can effectively expand access to people who are sort of left out of or underserved by the traditional financial ecosystem.

So we're pretty excited about what Borrow has been able to do and all while maintaining loss rates in that sort of 3% or less range with strong unit economics.

Great. Really nice to see how this business is evolving. Great job.

Thank you.

Your next question comes from the line of Matthew O'Neill from FT Partners.

I just wanted to drill in and hear some early observations, particularly around the rollout of new hardware and seller, notably the Handheld. Curious if you're seeing anything around TAM expansion, win rates, improved retention or anything else that would be good to share here.

Yes. We've been super excited about Square Handheld. It's definitely our best form factor yet. We packed a lot in and again, like we listened to our customers on what their needs are and made something that's super portable, super affordable and extremely durable.

But what's most interesting about it is that it scales to multiple types of commerce, not just for the restaurants, but it can be used in a retail setting or a service setting. So it's, by far and away, our most flexible and I think one of the most flexible in the industry. We launched it in the U.S. in Q2, and we're starting to roll it out internationally right now. So super excited about it.

The hardware has always been a big driver for us, and we think it will continue to be. It makes for a very easy sale, especially to our newer customers or winning sellers away from others. But of course, it's not the only driver. The other thing that I think is going to be quite powerful over the next year or so is going to be Square AI.

This is getting more and more sophisticated. We started with just the ability for our customers to quickly get more customized reports. But as we said a few earnings calls ago, we want this to effectively act as a virtual COO, virtual manager, if you will, to help folks manage their business of any type whether it be a restaurant, retail or service and at any scale. And the team has been working super hard and fast on making sure that it really lives up to that promise.

We're starting in the dashboard because that's where all of our sellers spend the majority of their time. It's also our one opportunity to introduce them to the entire Square ecosystem so that we can introduce them to a lot of our other services, including banking and customer relationship management. So it's a really good flywheel for us, and it allows us to put a natural intuitive language-first option on all the complexity of our ecosystem that we can offer sellers in a much simpler way. And then, of course, the other big feature that we announced recently was enabling Bitcoin acceptance on Square.

And this is early, but we think it's a big one. We think it's a good complement to everything that we're doing. There's also been a lot of talk about stablecoins. Our philosophy at Square has always been to accept every form of payment that comes across the counter.

And we're certainly going to enable our sellers to accept every form of payment, including Bitcoin or Tether or Circle. Anything that people are actually using to pay for goods and services, we're going to enable our sellers to accept because it means they always make the sale. And that's really critical to us. So those 3, the hardware, our AI efforts within the dashboard and the app itself, and the new forms of payments set all of our seller up for a much more comprehensive and flexible offering in operation.

And we pair that with just as a much stronger go to market and sales. Our marketing releases -- our last marketing release, we're doing this twice a year, was a hit and we can't wait for the next one. And everything that Nick and team has been doing with field sales and just really refining our approach is starting to show the effect, and that's from all scale of our sellers from the very small to the very large. So I think it's a perfect formation such that we can really compete on the merit of our offerings, which I think are immense.

We will now take our last question from the line of David Koning from Baird.

Great job. I guess you touched on the willingness to accept stablecoins at your sellers. I was just thinking more broadly. You focused so much on Bitcoin historically. Kind of what's your philosophical thought around stablecoins? Where do you think it's going to be most useful? And how might you guys play within the broader stablecoin ecosystem?

I think the most important thing is if people want to use it to purchase or if they want to use it to transact or transmit money through Cash App, we're going to support it. So you should expect Square and Cash App to support these things if people are using them, and we would focus on the major ones in use. We do have a bank and we do -- we can offer our own stablecoin, and there are a lot of stablecoins being generated right now. And I don't necessarily always see the product market fit for all of them.

I don't see the differentiator. It really comes down to what are people using and why they're using it. And right now, stablecoins are predominantly used in a remittance use case. If they do become more payments oriented, we'll be there.

I don't think right now that it makes sense for us to offer our own because I just don't think there's a huge differentiator above and beyond what exists and in my view, above and beyond what Bitcoin provides. Bitcoin still stands alone in it being entirely net new, and it has properties that none of these stablecoins have, which make it a better form of currency than the rest of them. It's certainly proven the case over 16 years as a store value. But our intention is to make sure that Bitcoin becomes the native currency of the Internet and that's used as everyday money.

And we think it can get there very quickly. And the reason to focus on that is because it's independent of any one particular corporation or any government. And it allows us to move much faster with our business as it does become more and more of a standard, not only at store value but remittance and also payment that allows Square to go to every single market almost instantly. And the same is true for Cash App as well.

So we're huge believers in it. We know it's going to be a long road. It's a protocol. Protocols move a lot slower than products and companies tend to do, but they tend to last longer as well.

And that's why we believe in it so much, and we think it massively accelerates our business when it does hit, and we intend on making a hit as soon as possible.

Ladies and gentlemen, thank you for your participation in today's program. This does conclude the program. You may all disconnect.