Cathie Wood just sent a fresh signal on Block (XYZ), and the timing is hard to miss.
Ark Invest bought 456,059 shares of Block across three exchange-traded funds (ETFs) last week, worth about $37.4 million. The purchase came after Block dipped nearly 2% that day. But the bigger story is what came before it. In February 2026, CEO Jack Dorsey cut more than 4,000 jobs, or roughly 40% of the workforce, as he pushed Block toward a leaner, more artificial intelligence (AI) driven model. XYZ stock jumped about 22% on the news.
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Now, Wood is buying shares of Block after another strong quarter. That looks like more than a simple dip buy. It is a bet that a smaller workforce and stronger margins can drive durable earnings growth.
Block Stock's Performance
Block shares have managed to gain almost 23% year-to-date (YTD) after dipping in the first two months of 2026. The recovery has been driven by stronger earnings, better Cash App trends, higher profit guidance, and AI optimism. Still, Block has lagged the broader market over the past year, as valuation and credit losses remain risks.
Block trades at about 29.2 times forward earnings and 1.9 times sales. Although its forward earnings multiple is above the payments sector median, the fintech is delivering rapid adjusted earnings growth. Meanwhile, its enterprise value-to-revenue ratio near 1.7 times is below the payments median. Overall, the valuation supports the bullish case.
www.barchart.com Why Cathie Wood's Purchase Matters
Wood's purchase reinforces the central argument behind Block's restructuring. Dorsey did not cut 4,000 jobs to simply reduce expenses. He is trying to make Block faster and more automated. On the latest earnings call, he said, "At this point, a Block AI is involved in basically every single production code change or production code review."
That matters because lower staffing costs can create leverage if revenue keeps growing. Block is using AI across fraud detection, lending, marketing, and software development. The firm launched Buzz in July to speed product development.
The company is expanding elsewhere, too. Neighborhoods has grown more than 10 times through auto enrollment and now reaches sellers representing $1 billion in annualized gross payment volume. That creates another bridge between Square sellers and Cash App users. Wood appears to be betting the Block layoffs were the start of a bigger efficiency story, not the end of growth.
Q2 Showed Why Investors Are Paying Attention
Block's second quarter was strong. Revenue reached $6.62 billion, up more than 9% year-over-year (YOY). Gross profit rose 25% YOY to $3.17 billion. Cash App gross profit jumped 31% to $1.97 billion, while Square gross profit climbed 13% YOY to $1.16 billion.
Adjusted operating income reached $864 million, producing a record 27% margin. Adjusted diluted EPS rose 65% YOY to $1.02. Free cash flow hit $967 million, up 182%. Block ended the quarter with about $6.4 billion in cash and equivalents, or $7.9 billion including marketable debt securities.
The weaker spot was net income, which fell more than 83% YOY to $89 million. Investors should look beyond adjusted results.
Management expects Q3 gross profit of $3.13 billion, up 18% YOY, adjusted operating income of $875 million, and adjusted EPS of $1.02, up 89% YOY. For fiscal 2026, Block expects $12.51 billion of gross profit, $3.47 billion of adjusted operating income, and adjusted EPS of $4.02, up 70% YOY.
Wall Street Is Leaning Increasingly Bullish on Block Stock
Analysts have turned more constructive on XYZ stock. In June, Piper Sandler raised its price target to $100 and said Block's valuation understates the durability of its earnings outlook. In August, Wolfe Research lifted its target to $115 from $100, citing healthy consumer spending and credit trends. Argus also raised its target to $103 from $85, saying AI-driven efficiency offers upside but still needs to be proven after the workforce cuts. Meanwhile, Morgan Stanley has an “Overweight” rating and a $90 price target on Block.
Overall, Wall Street has a consensus “Strong Buy” rating based on 44 analysts with coverage. The mean price target of $97.79 implies meaningful potential upside of around 23% from current levels
That makes Cathie Wood's recent purchase notable. Wood is backing Block's new playbook: fewer employees, heavier AI use, stronger margins, and faster product execution. The test is clear. Block must keep growing while proving those efficiency gains can translate into lasting earnings.
www.barchart.com On the date of publication, Nauman Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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