We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Block's lending growth came with higher credit losses, though cash and operating cash flow remain strong.
Block Inc.’s (XYZ - Free Report) consumer-lending business is emerging as a key growth driver, fueled by the rapid adoption of Cash App Borrow and Afterpay. Consumer-lending originations reached $17.6 billion in the first quarter of 2026, up 82% year over year, led by a roughly 175% increase in Cash App Borrow originations as eligibility expanded to more Cash App Green customers.
Block continues to broaden its lending ecosystem through Afterpay's installment offerings, including Post-Purchase, Pre-Purchase, Pay Monthly and BNPL options integrated into Cash App Pay and peer-to-peer payments. The strategy is driving higher engagement and monetization. Financial Solutions gross profit climbed 55% year over year in the first quarter, while Cash App Financial Solutions gross profit per active customer increased 60%. Overall, Cash App gross profit rose 38%, with lending among the largest contributors.
Rapid expansion, however, has been accompanied by higher credit costs. Transaction, loan and consumer receivable losses rose to $500 million in the first quarter from $170 million a year earlier. The allowance for credit losses on loans held for investment increased 26% sequentially to $482.8 million, while classified higher-risk loans grew 23% to $467.3 million.
Cash App Borrow gross loss rates ranged from 3.16% for newer borrowers to 2.67% for customers with more than 13 months of tenure, indicating relatively stable cohort performance. With $6.86 billion in cash and strong operating cash flow, Block appears well positioned to support lending growth, provided gross profit continues to outpace normalized credit losses.
How Are Block’s Competitors Faring?
Dave Inc.’s (DAVE - Free Report) offers ExtraCash advances of up to $500 with no interest, credit checks or late fees. In first quarter 2026, DAVE reported $158.4 million in revenue, up 47%, while ExtraCash originations rose 37% to $2.1 billion. DAVE also reached roughly 3 million monthly transacting members.
SoFi Technologies (SOFI - Free Report) competes through larger unsecured personal loans for debt consolidation and major expenses. SOFI originated $8.3 billion in personal loans in the first quarter 2026. Unlike short-term cash advances, SOFI uses fixed monthly installments and serves borrowers seeking larger loan amounts.
XYZ’s Price Performance, Valuation & Estimates
Shares of Block have rallied 20.5% over the past three months, outperforming the broader industry and the S&P 500 Index.
Image Source: Zacks Investment Research
In terms of forward 12-month P/E, XYZ stock is trading at 17.30X, which is at a discount to the Zacks Internet Software industry’s 27.09X.
Image Source: Zacks Investment Research
Block’s earnings estimate revisions reflect a positive trend. The Zacks Consensus Estimate for full-year 2026 EPS has been revised marginally northward. The figure indicates a significant increase year over year.
View the Zacks #1 Rank List
Image: Bigstock
Block's Consumer Lending Strengthening: Can it Offset Credit Risks?
Key Takeaways
Block Inc.’s (XYZ - Free Report) consumer-lending business is emerging as a key growth driver, fueled by the rapid adoption of Cash App Borrow and Afterpay. Consumer-lending originations reached $17.6 billion in the first quarter of 2026, up 82% year over year, led by a roughly 175% increase in Cash App Borrow originations as eligibility expanded to more Cash App Green customers.
Block continues to broaden its lending ecosystem through Afterpay's installment offerings, including Post-Purchase, Pre-Purchase, Pay Monthly and BNPL options integrated into Cash App Pay and peer-to-peer payments. The strategy is driving higher engagement and monetization. Financial Solutions gross profit climbed 55% year over year in the first quarter, while Cash App Financial Solutions gross profit per active customer increased 60%. Overall, Cash App gross profit rose 38%, with lending among the largest contributors.
Rapid expansion, however, has been accompanied by higher credit costs. Transaction, loan and consumer receivable losses rose to $500 million in the first quarter from $170 million a year earlier. The allowance for credit losses on loans held for investment increased 26% sequentially to $482.8 million, while classified higher-risk loans grew 23% to $467.3 million.
Cash App Borrow gross loss rates ranged from 3.16% for newer borrowers to 2.67% for customers with more than 13 months of tenure, indicating relatively stable cohort performance. With $6.86 billion in cash and strong operating cash flow, Block appears well positioned to support lending growth, provided gross profit continues to outpace normalized credit losses.
How Are Block’s Competitors Faring?
Dave Inc.’s (DAVE - Free Report) offers ExtraCash advances of up to $500 with no interest, credit checks or late fees. In first quarter 2026, DAVE reported $158.4 million in revenue, up 47%, while ExtraCash originations rose 37% to $2.1 billion. DAVE also reached roughly 3 million monthly transacting members.
SoFi Technologies (SOFI - Free Report) competes through larger unsecured personal loans for debt consolidation and major expenses. SOFI originated $8.3 billion in personal loans in the first quarter 2026. Unlike short-term cash advances, SOFI uses fixed monthly installments and serves borrowers seeking larger loan amounts.
XYZ’s Price Performance, Valuation & Estimates
Shares of Block have rallied 20.5% over the past three months, outperforming the broader industry and the S&P 500 Index.
Image Source: Zacks Investment Research
In terms of forward 12-month P/E, XYZ stock is trading at 17.30X, which is at a discount to the Zacks Internet Software industry’s 27.09X.
Image Source: Zacks Investment Research
Block’s earnings estimate revisions reflect a positive trend. The Zacks Consensus Estimate for full-year 2026 EPS has been revised marginally northward. The figure indicates a significant increase year over year.
Image Source: Zacks Investment Research
Block currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.