(Corrects paragraph 8 to say Owen Jennings is executive officer & head of business, not chief operating officer)
Nov 3 (Reuters) - Jack Dorsey-led Block raised its full-year gross profit outlook on Tuesday after posting a rise in third-quarter earnings, helped by strength in its Cash App unit and steady consumer spending that offset an uncertain economic backdrop.
The US economy grew at its fastest pace in a year in the third quarter, shrugging off higher oil prices due to the Iran war, as consumers maintained robust spending and businesses increased investment in AI.
Gross profit at Cash App, Block's consumer-focused financial platform, surged 27% in the third quarter from a year earlier. Gross profit at its Square merchant business rose 14%.
"Neighborhoods was a key driver of Cash App scaling to 60 million monthly transacting actives in September," CEO Jack Dorsey said in a letter to shareholders.
Cash App's growing banking and lending products have helped Block diversify its revenue streams beyond transaction fees, but they have also increased the company's credit losses. Block's losses on transaction, loan and consumer receivables rose 65.6% to $601.7 million in the third quarter.
"We've seen continued strong spending on Cash App Card as well as strong repayment rates on Borrow, which for us are the signals that collectively tell us consumers are managing their finances and the strength of their pocketbook," Chief Financial Officer Amrita Ahuja told Reuters in an interview.
Block now expects gross profit of $12.63 billion for 2026, representing 22% growth, compared with its prior forecast of $12.51 billion. It forecast gross profit of $3.32 billion for the fourth quarter.
Executive Officer & Head of Business Owen Jennings said the company expects the fourth quarter to mark the first time it generates revenue directly from AI tools.
The fintech firm also forecast 2027 gross profit of $14.52 billion, implying 15% growth, as it expects AI investments to drive sustained growth.
Adjusted operating income rose to $923 million, or $1.13 per share, for the three months ended September 30, compared with $480 million, or 54 cents per share, a year earlier.
(Reporting by Rishab Shaju and Prakhar Srivastava in Bengaluru; Editing by Leroy Leo)
