Key Takeaways
- Morgan Stanley elevated Block (XYZ) to Buy status, boosting its price target from $72 to $93, emphasizing accelerated growth prospects and broader market opportunities.
- The company unveiled plans for a workforce reduction of approximately 40%, trimming employee count to about 6,000, with artificial intelligence taking over much of the displaced work.
- Bank of America increased its price projection to $86 from $75, pointing to anticipated 26% adjusted operating income margin and 18% gross profit expansion in 2026.
- Cash App’s gross profit surged 33% during Q4, with monthly active users reaching 59 million and consumer lending originations soaring 69% compared to the previous year.
- Analyst consensus on XYZ stands at Strong Buy, featuring an average target price of $86.08, suggesting approximately 58% potential upside.
Shares of Block experienced a dramatic rally of approximately 17% during Friday’s pre-market session following CEO Jack Dorsey’s announcement of a sweeping workforce reduction affecting roughly 40% of employees.
The restructuring will reduce the company’s headcount to approximately 6,000 workers, with artificial intelligence technology expected to handle the workload previously managed by departing staff.
Morgan Stanley’s James Faucette swiftly elevated his rating on XYZ from Hold to Buy, establishing a fresh price target of $93, representing a significant increase from the previous $72 mark.
Faucette highlighted what he described as “faster growth and an expanded TAM,” emphasizing that enhanced product offerings and more adaptable pricing strategies have unlocked previously untapped market segments for Block.
His earnings projections for 2026 were revised upward to $3.81 per share from $3.19, while his 2027 forecast increased to $5.19 from $4.10.
Morgan Stanley‘s $93 price target reflects an 18x multiple on 2027 adjusted earnings. The firm acknowledged this valuation might prove modest considering anticipated revenue acceleration and approximately 26% earnings growth expected in 2027.
In a shareholder letter, Dorsey disclosed that more than 4,000 workers are being separated or entering consultation processes. CFO Amrita Ahuja characterized the reductions as strategic positioning for Block’s “next phase of long-term growth.”
Executives emphasized that margin expansion stems from fundamental business improvements rather than cost-cutting in response to operational challenges. The market appeared to reward this strategic clarity.
Cash App and Lending Operations Display Robust Growth
Cash App’s gross profit increased 33% during Q4 2025, while monthly active users expanded to 59 million from 57 million in the prior year.
The platform added one million primary banking customers during Q4 alone, elevating that metric to 9.3 million users.
Consumer lending originations experienced 69% year-over-year growth in Q4, with Cash App Borrow originations skyrocketing 223%.
Within the Seller ecosystem, pricing adjustments have attracted larger merchants and boosted adoption of supplementary services. Seller gross payment volume has demonstrated consistent acceleration since Q2 2025.
Total gross profit expanded 24% in Q4 2025 — representing a significant rebound from the deceleration witnessed between 2022 and 2024, when growth had contracted to 18%.
Financial Analysts Endorse AI-Driven Transformation
Bank of America’s Jason Kupferberg elevated his price target from $75 to $86 while maintaining his Buy recommendation.
He emphasized that Block anticipates 18% gross profit growth throughout 2026 despite reducing headcount by 40%, with adjusted operating income margin projected to climb to 26% from the previous year’s 20%.
Kupferberg identified the “key debate” as whether a leaner, AI-enabled workforce can execute effectively. Current market sentiment suggests investors are optimistic.
The Street’s collective stance on XYZ remains Strong Buy, supported by 24 Buy ratings, two Hold recommendations, and one Sell rating.
The consensus price target among analysts stands at $86.08, implying roughly 58% appreciation potential from current trading levels.
Block has issued guidance for 18% gross profit growth in 2026, with Q4 2025 performance already demonstrating momentum in that trajectory.
