Block (XYZ +0.26%) recently reported its first-quarter earnings, and the numbers were quite strong across the board. Gross profit grew 27% year-over-year, including 38% growth on the Cash App side of the business. The company posted a 25% adjusted operating margin, and customer engagement metrics were extremely strong.
In addition, Block raised its full-year guidance to "reflect the strength we are seeing across our business." Management now expects adjusted EPS to grow by an impressive 62% year-over-year, fueled by a combination of strong gross profit growth and improving margins.
To be clear, all of the key numbers looked great. But the most important part of the story is beyond the headline numbers.
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Here's why Block's results are improving
In a nutshell, Block doesn't just see AI as a productivity tool or a feature that could improve its products -- management considers AI the backbone of the company, both internally and in its products.
You may recall that in February, Block announced that it was reducing its workforce by nearly half -- one of the most dramatic downsizings of the AI era so far. CEO Jack Dorsey had said at the time that AI "fundamentally changes what it means to build and run a company."
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Key Data Points
Well, in his first quarter letter to shareholders, Dorsey wrote that "As of mid-April, production code changes per engineer are up over 2.5x compared to January." He went on to say that incident rates after a production code change were down by more than 70% compared to the first quarter of 2025. In short, Block's engineers are not only more productive, but they can do their work better thanks to AI tools.
Proactive AI is improving engagement
That's some context from the internal side of the AI implementation. But Block is doing a great job of using customer-facing AI products as well. And they go way beyond chatbots and the AI assistants every other fintech company has. As Dorsey said in the shareholder letter, "We think the next step is AI that is proactive." Block is rolling out two extremely promising examples of proactive AI products.
On the Cash App side, the company's Moneybot tool finds patterns like forgotten subscriptions or spending drift and helps customers to identify them and take action. On the Square side, the company's Managerbot helps sellers find and fix staffing inefficiencies, vendor pricing problems, and other costly mistakes.
Recently rolled out across the Cash App universe, Moneybot was used by more than 1 million Cash App customers in its first week alone. And the company found that customers who follow one of Moneybot's suggested actions are five times more likely to return to the product. Managerbot is showing similarly impressive engagement results.
Why it matters to investors
Here's the point. Proactive AI is driving meaningful engagement on Block's platforms, a massive catalyst for customer retention. And as its AI models learn from customers' financial data, these tools will only get stronger.
Dorsey summed it up well in the earnings call, saying, "I believe we evolve into an intelligence company... we're looking deeply at our understanding of our sellers and our Cash App customers, and we're delivering them exactly what they need at the right moment."
As a final thought, keep in mind that much of Block's AI strategy is still in the very early stages. For example, both Moneybot and Managerbot are just rolling out to users and are not priced into the business yet. And the internal efficiency advantages will take a few quarters before they fully show up in the numbers.
