Block - Earnings Call - Q2 2025
August 7, 2025
Transcript
Speaker 3
Good evening, ladies and gentlemen, and welcome to the Block Second Quarter 2025 earnings conference call. Today's call will be 45 minutes. I would now like to turn the call over to your host, Matt Ross, Head of Investor Relations. Please go ahead.
Speaker 0
Hi everyone, thanks for joining our second quarter 2025 earnings call. We have a fascinating agenda with us today. We will begin the call with some short remarks before moving on directly to your questions. During Q&A, we will take questions from conference call participants. We would also like to remind everyone that we will be making forward-looking statements on the call. All statements will include statements of historical facts to be seen before forward-looking. These forward-looking statements include discussions about public strategy and guidance, as well as our long-term targeting goals. These statements are subject to risks and uncertainties, including changes in macroeconomic conditions. Actual results could differ materially from those contemplated by our forward-looking statements. Reported results do not consider any indication of future performance. Please take a look at our filings at SEC for a discussion of the factors that could cause our results to differ.
Also note that the forward-looking statements, including earnings added into 2025, that discussed on the call are based on information available to us and is subsequently reviewed at SEC. We do claim any obligation to update any forward-looking statements to the status of prior law. Further, any discussions during the call will have anything to do with anything product or products that are offered through requests and services for our bank partners. Within these remarks, we will also discuss the next related asset management framework, including the Rule of 40. With the Rule of 40, we are evaluating some of the growth product growth and suggested value in the margin. Also, we will discuss certain non-aggregate management measures during this call. Our considerations of those directly comparable to asset management measures are provided in the short order, and our historical claims information is received on our Investor Relations website.
These non-aggregate measures are not intended to be a substitute for our revamped results. Finally, the call in its entirety is being audio webcast on our Investor Relations website. An audio replay of this call and the transcript of the Jack Dorsey opening remark will be available on our website shortly. With that, I'd like to turn the call over to Jack.
Speaker 1
Thank you all for joining us. As you all know, we've been talking for several quarters about our focus on increasing product velocity and ramping up our market investment. This quarter, we can show we're working off. We're back to growth mode across the company. We're shifting faster, we're launching new features like tools in just a few months, and we're accelerating the pace of delivering AI functionality to our customers. In my letter this quarter, I discussed asset scale and impact, and our strategy is to continue growing by helping our customers manage their financial lives better. We believe the capabilities and tasks are unique, and that no one else can deliver the money we're building for consumers. I hope you take a look. With that, I'll turn it over to Amrita.
Speaker 2
Thank you, Jack. We delivered strong results in the second quarter, exceeding our gross profit and adjusted operating income guidance. Gross profit was $2.5 billion, up 14% year over year, accelerating from 9% growth last quarter. Adjusted operating income was $550 million, up 38% year over year, as we extended margin to our highest quarterly adjusted wide margin yet, 22%. Product innovation and go-to-market investments are accelerating across Block. We're delivering more value faster and more efficiently. In the second quarter alone, we launched Square AI, Square Handheld, and an updated version of Square Online. We showcased the quick payments on Square, introduced Tap to Pay for Business powered by Square, and rolled out TapBot, our AI-powered customer support agent.
We released Pay Monthly for Afterpay single-use payments in the U.S., new features for sponsored accounts, a new, more personalized offers platform, and we took Cash App Pools from development to pilot in just a few months. In Cash App, gross profit growth reaccelerated to 16% year over year in the second quarter. Cash App Card delivered healthy gross profit growth at scale, and BNPL gross profit reaccelerated, driven in part by the increasing attach rates for post-purchase BNPL on Cash App Card, which crossed 1 million monthly actives in July. We began to meaningfully ramp Borrow on Square Financial Services during the second quarter. Our bank, SFS, now originates the majority of Borrow loans for our customers, and we plan to continue expanding SFS originations throughout the second half of the year. We're also exploring more ways to deepen engagement, including higher Borrow limits for paycheck deposit actives.
We believe the combination of assets we have in Cash App is unique and positions us for attractive, sustainable long-term growth as an enduring ecosystem. Our strategy is oriented around driving strength in the four pillars of our business. First, we have a scaled peer-to-peer network that drives community connection and Cash App customer acquisition, with $218 billion in peer-to-peer volume in the last 12 months. Second, our broad commerce capabilities generated $183 billion in volume in the last 12 months, growing 16% year over year, or 21% excluding Cash App Business. Third, our banking solutions help millions manage their money. In June, 8 million actives either deposited a paycheck or spent at least $500 across Cash App, and borrow reached $18 billion in annualized originations. Fourth, we've enabled millions of actives to buy and sell $58 billion in Bitcoin.
For paycheck deposit actives who receive some of their paycheck in Bitcoin, we provide what we believe is the only way to buy Bitcoin with no fees and no spread. Cash App is resonating with the next generation at scale. In June, we had 5 million sponsored teen actives and 1.7 million actives that had graduated from a sponsored account to an individual Cash App account. Engagement with sponsored teen actives is strong, with nearly 80% attach rate to Cash App Card and over 25% attach rate to Cash App Pay. Simply put, Cash App meets the needs of this generation and delivers tools to help them run their financial lives. Turning to Square, year over year, GPV growth accelerated to 10% in the second quarter, and we delivered 11% gross profit growth, which included a network remediation payment we had previously discussed at the end of last year.
We observed strong GPV growth in food and beverage and retail, up 15% and 10% respectively. International GPV growth accelerated to 25% year over year as we continued to expand distribution across sales and partnerships. We are changing perceptions of Square among new and existing customers, a testament to the products we've launched in the past year and the investments we're making across marketing, field sales, and partnerships. We're focused on winning the quick-serve restaurant market, and we're delivering with customer wins like Collectivo Coffee, Shane's Rib Shack, and Ben's Soft Pretzels, a 60-location seller that we're thrilled to welcome back to Square. These amazing sellers are category leaders in their communities, and we're honored they choose to partner with us. Beyond winning QSR, we continue to see strong performance from our field sales team, with an estimated five to six-quarter payback on recent sales cohorts.
In the second quarter, we delivered our highest ever new volume added and our strongest growth in new volume added since the third quarter of 2021. Year to date, forecasted new gross profit added outpaced forecasted new GPV added as we grew up market in the U.S., signaling healthy pricing and product attach rates. We've continued to see high ROIs as we scale field sales, and we expect to continue to ramp sales personnel aggressively to broaden our distribution footprint further. We're also seeing early traction with our independent sales organization investments and expect to continue to scale that distribution channel further in the quarters ahead. Turning to guidance, we're raising our full-year guidance and our expectations for the back half of the year. Our Q3 guidance and implied Q4 guidance call for continued acceleration in gross profit growth.
For Q3, we expect gross profit of $2.6 billion, growing 16% year over year. We expect adjusted operating income of $460 million, or 18% margin. We expect to exit the year with gross profit growth of 19% and over 20% adjusted operating income margin, positioning us well for 2026. As we look at Q3, there are two nuances to call out. First, we expect to see an adjusted operating income margin of 18% in the third quarter compared to 20%+ margins in the other quarters this year. This is due primarily to risk loss growth as we expand borrow. We are investing behind a product that has strong unit economics on incremental growth, and we expect loss rates to stay within historical ranges. The timing of our expanded go-to-market initiatives also contributes to Q3 margin dynamics.
Second, for Square, we expect to deliver low double-digit GPV growth in the third and fourth quarters, accelerating modestly from the 10% growth we delivered in the second quarter. We expect third quarter gross profit in the high single-digit range and fourth quarter growth to track roughly in line with GPV growth. Square's third quarter gross profit growth is impacted by a few dynamics, including our decision to increase operational flexibility at a processing partner, which modestly increases processing costs and further investments in hardware as a successful go-to-market driver for Square. We continue to be encouraged by the strong results we see in our go-to-market efforts for Square, with profitable volume growth and a return to share gains in recent quarters. For the full year, we're raising gross profit and adjusted operating income guidance to reflect our strong execution.
We expect full-year gross profit of $10.17 billion, or over 14% year over year growth. We expect adjusted operating income of $2.03 billion, or 20% margin. Expanding margins two percentage points YoY, despite the meaningful go-to-market investments we're making to grow our business. Our financial results and our updated guidance are a reflection of our ability to deliver value to our customers. We're honored to have been added to the S&P 500 this quarter, and we want to welcome new investors joining us on this journey. We believe we have the best combination of assets in the industry to deliver on our purpose of economic empowerment, and we're excited to share more about our long-term roadmap at our Investor Day on November 19, 2024. I'll now turn it back to the operator to start the Q&A portion of the call.
Speaker 3
Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. We ask that you please limit yourself to one question only. Your first question comes from the line of Tingshen Huang from J.P. Morgan. Your line is open.
Hey, thanks. Really, really impressive growth here in the quarter in the outlook. I just want to maybe check on conviction and visibility, of course, into the second half acceleration that you're talking about. I think, Jack, you mentioned you're shipping products faster. Given what you've seen and observed, I'm curious, are you more bullish in certain areas versus what we last talked about? Where might you be a little bit more cautious with more work to do than, say, 90 days ago?
Speaker 0
Yeah, I think this is all a function of our shipping velocity. I think the biggest indicator of this is the recent Cash App Pools launch. This is a pretty complicated feature just to do on network, and the team did an amazing job not just doing that within ideation to execution and shipping to customers within three months, but also made it possible for us to go out of network as well, meaning that you can create a pool and you can invite friends who are not on Cash App currently, and they can use Apple Pay or Google Pay to contribute to the pool and ideally see that functionality and the utility and then sign up themselves.
These are the sorts of features that we're now able to ship much faster, and it directly contributes to our overall network growth, which contributes to our overall virality and really, really strengthens what made Cash App Cash App in the first place, which is this inherent network effect that we have. The products we can build on top of that just get stronger because of it. It's all a function of us being able to show our customers everything that Cash App has to offer in the ecosystem. I've never been more confident of our ability to do that better than I am today. It's a function of our focus, but also the tools we have access to today with all of our AI coding tools. Goose is being used by nearly everyone in the company. It's accelerating our developers. It's accelerating our designers.
It's allowing us to experiment at near zero cost so that we can actually get to the right answer much faster. We can get the customer feedback much faster, too, so we can double down and pull the thread on what resonates with people. I'm super excited and super bullish on our ability to ship faster, which will make every single thing about Cash App and also Square that much better and more usable.
Speaker 2
Yeah, I just add, Tingshen, we saw a lot in the second quarter that gave us some healthy signs, some real encouragement around the products that are the key drivers of growth for us and the key drivers of acceleration in the second half. That is what gave us the conviction to raise our guidance by more than the beat in Q2 to raise the back half of the year across both gross profit and OI. What our guidance calls for is two points of sequential acceleration into Q3 and three points of further sequential acceleration into Q4. That is really on the back of four key things where, again, we saw strong data points in the second quarter.
First, on the strength of borrow, we now have 6 million monthly actives on borrow. We are expanding eligibility, increasing limits in a responsible way with healthy loss rates, and seeing enhanced unit economics as we transition that migration from a partner bank to our own bank, SFS. Secondly, we are seeing some of the newer products in Cash App, like post-purchase BNPL and Cash App Card, which is the first real integration of Afterpay into Cash App, and Cash App Pay, two important commerce products for us, really resonate and start to compound more meaningfully. Post-purchase BNPL, as of July, crossed the 1 million active milestone, and we are really excited, again, about what we are seeing in terms of growth.
If you compare post-purchase BNPL to borrow at similar points in time, the newer product, which gets to learn from borrow, is outpacing in terms of attach rates and in terms of loss rates. Cash App Pay now at 7 million monthly actives as of June. Third key driver is Proto. You will see a lot more at next week's launch event, but we expect Proto to begin contributing to gross profit growth in the second half of the year. Finally, Square. We are seeing some nice acceleration in the Square business, and we would expect to exit the year in Q4 with faster GPV growth, which ultimately will compound to gross profit growth over time as well.
Speaker 3
Your next question comes from a line of Tim Shoto from UBS. Your line is open.
Great, thank you. I want to dig in a little bit more on Cash App Card post-purchase BNPL. This topic comes up a lot because investors are now very confident in the ramp in borrow in the second half and the lapping dynamics. Those are supportive of gross profit growth heading into at least the first half of 2026 as well. We're often asked, what's the next big product that can help drive the growth in the second half of 2026 and beyond? Of course, there's a long list of items, and many of them are highlighted in the shareholder letter, but one that stands out is Cash App Card post-purchase BNPL. You just mentioned some of the stats, the 1 million, the attach rates, the loss rates.
I was hoping you could just elaborate a little bit more on this product in terms of those attach rates and just anything else that can help us to better quantify that opportunity in 2026 and beyond.
Speaker 2
Sure, thanks for the question, Tim. We released the product in March, and it's been one of the key drivers of growth acceleration for Cash App and also what you saw overall for the BNPL platform. If you look across the second quarter, GMV for BNPL accelerated to 17% on a reported basis, 18% constant currency, up from 13% and 16% respectively in the first quarter. We also saw gross profit accelerate to 22% YoY growth, part of an accelerating story for BNPL overall. The early signs that we've seen for post-purchase BNPL have been really strong: strong conversion, strong adoption. As I mentioned, we crossed the 1 million monthly actives mark. We also crossed the $2 billion originations run rate mark in July and expect to continue to expand eligibility and increase attach rates as we look at the back half of the year.
As I noted earlier, we're really taking the learnings from borrow, and as we stack up post-purchase BNPL against borrow's early trajectory, both in terms of origination volume and margin profile, because we're able to leverage our infrastructure around the Cash App credit score, we've been able to track ahead of where borrow is, and we know that that's become a successful product for us. We're encouraged about these early signs that we're seeing on BNPL.
If I step back and think about 2026, obviously, we'll have a lot more to say later in the year and at Investor Day, but I think about the nascent products that are still ramping, like post-purchase BNPL, which we'd expect to contribute more in 2026, our traditional pay-in-four, bringing that more into Cash App, and seeing that ramp into 2026, Cash App Pay, some of the newer products that we've talked about, like Tap to Pay for Business, all these newer products continuing to ramp into 2026 for Cash App. I'd expect borrow to continue to be a growth driver for us as well. It's not just about the back half of this year. As we look ahead into 2026, there are compounding effects of these go-to-market investments we're making across each of Cash App and Square.
There are a number of drivers of growth as we look at 2026 that we get excited about. Most importantly, the key takeaways from this call, as you heard from Jack, are really around product velocity increasing. There's even more coming than what we have today.
Great, thank you, Amrita.
Speaker 3
Your next question comes from the line of Darren Peller from Wolfe Research. Your line is open.
Guys, thanks. A nice job. Just one more follow-up on Cash App. I mean, it was obviously strong and accelerated well. Borrow was strong at $18 million of originations, but we really appreciate the new disclosure you're giving. I saw 8 million banking actives you define as either one of the 2.5 or 2.7 million direct deposit users, or I think someone spending $500 per month across Cash App. That number was up 16%. Can you just touch on that metric a little bit more? It's new, I haven't seen that disclosure before. How do you see that trending driving Cash App gross profit even into next year if we're thinking about that the right way? I also love the call out on new areas for potential MAU growth on Cash App. Just how's that been trending too? Thanks, guys.
Speaker 2
Hey, Darren. I can get started on this one. First, what I would say is what you saw in the letter is that we continued to experience strong growth on paycheck deposit actives. With the 2.7 million that we reported in June, we also added another $100,000 in July, so we're now over 2.8 million. We continue to compound growth there. As we have done extensive research to inform our banking strategy, how we think about incentives, how we think about marketing to this customer base, as we did that customer research, we observed that many more people look at Cash App as their primary banking partner than the ones who we are recording in the paycheck deposit active metric. That caused us to analyze inflows. We looked at spend levels. We looked at transaction metrics to better understand how our customers are using Cash App.
Based on that analysis, we put forward some of the new metrics that you noted in the letter. In particular, looking at a spend threshold as the primacy of a banking relationship. That $500 per month threshold we thought was important. The average debit card spend in the U.S. is about $900 a month. That would reflect really someone who's, by and large, making Cash App Card top of wallet. When we look further at the ARPU of these 8 million banking actives who are either depositing a paycheck or spending $500, first of all, they're growing quickly, up 16% YoY. Second of all, they're deeply engaged. They generated more than $250 in gross profit per active on an annualized basis in the second quarter, which is obviously three times Cash App's blended $87 ARPU. On average, they transacted more than 40 times across Cash App in June.
We're pretty encouraged about our traction with our banking strategy. We know that there's millions of people who place their trust in Cash App to be their banking platform. We're going to be doing more. We mentioned testing higher borrow limits for paycheck deposit actives. You'll also see us testing expanding our banking benefits based on the spend thresholds. We'll be doing more to bring awareness and incentives around our banking platform.
Speaker 3
Your next question comes from a line of Reina Kumar from Oppenheimer. Your line is open.
Speaker 2
Good afternoon. Thanks for taking my question. Last year, you started to lean a bit more into a Square sales effort. Of course, you've launched a number of new products. Can you talk a little bit about some of the returns you're seeing on these investments and if it's scaling as you expected? Hey, Reina. Yeah, we're very excited about what we're seeing in the early results of our expanded go-to-market playbook. We are getting ourselves in front of a much wider set of sellers now, and we're starting to see that accrete in terms of market share gains. In particular, from a sales perspective, what we're seeing is strong growth in the first half of this year on new volume added, 20%+ growth rates on new volume added.
We actually expect that growth to more than double in the fourth quarter, just on the back of how we're ramping our sales team across both field sales and telesales. Field sales, which is a newer motion for us, we're seeing an LTV/CAC, which is how we measure returns on investment, at extremely strong rates and payback, as I noted earlier, in that five to six quarter range. That's what's given us the confidence to continue to ramp both the field sales teams as well as our telesales teams, both in the U.S. and internationally. The marginal returns of these new hires are very strong, which gives us conviction to continue investing here.
It's that sales motion in concert with our partner motion, where we are seeing exceeding our expectations from a partner-driven lead perspective in the second quarter, and also newer channels of growth within the partnership world around our first U.S.-ISO partnerships. That's what's driving very strong momentum across our sales channels. I would also just note the strong growth that we're seeing from an international perspective. That's another place where we think international at 25% GPV growth, 19% gross profit growth in the second quarter is really benefiting from the investments that we've made on the ground with our sales motions. I would say even the final thing I'll say is that while we've seen really strong sales-enabled growth through both field sales, telesales, and partnerships, it hasn't come at the detriment of self-onboarding from what we've seen.
We continue to see really strong volumes with our already healthy sort of self-onboard motion as well.
Speaker 3
Your next question comes from a line of Trevor Williams from Jefferies. Your line is open.
Great, thanks a lot. I wanted to go back to the spread between gross profit and GPV growth in Square. That was a bit narrower than where it was in the first quarter. If you could talk through some of the moving pieces there, I think you had pricing that went in at the end of March, the network incentives Amrita mentioned, just what the offsets to those were. For the rest of the year, it sounded like gross profit a bit below GPV in Q3 and in line in Q4. Just the moving pieces within those two quarters, and if longer term, we should be thinking about a pretty tight spread between those two growth rates. Thanks.
Speaker 2
Sure. I think the main thing that's going on here is a few nuanced near-term dynamics impacting Square gross profit that aren't really a reflection of the underlying strength of the business. Ultimately, what we're focused on is compounding sustainable GPV growth, and we know that that will accrete to gross profit growth. One of the key things that we're looking at, we just talked about our sales motion, is that our new profit added from new cohorts of customers is even stronger than new volume added in the U.S., which tells us that our pricing and attach to additional products across our ecosystem continue to be strong as we onboard these new customers. That will compound over time as we get into 2026 and beyond. In the near term, there are a couple of dynamics to point out.
As I mentioned in the intro remarks, we made some changes that increased our operational flexibility at a processing partner. That modestly increased Square's processing costs. In the second quarter, we absorbed approximately 2% of gross profit growth headwind from this shift, which basically offset that network remediation payment that we had talked about earlier. That's something that we would also expect, as I noted earlier, to impact the third quarter. It is sort of a couple of quarter impact, and we will lap that as we head into 2026. The second key thing I'd point out is hardware costs. Some of our newer hardware with Square Handheld has seen strong adoption, and it continues to be a great go-to-market new customer acquisition channel for us. That's one that we want to lean into as we bring new customers into the platform. That's another impact from the Q3 perspective.
Ultimately, though, we expect to exit the year with gross profit and GPV growth roughly in line with each other and to continue to focus on that cross-sell of more of our products to customers to help them run and grow their business.
Speaker 3
Your next question comes from a line of Hershita Rawat from Bernstein. Your line is open.
Okay, good afternoon. I want to ask about Cash App user growth. Jack, you talked about focusing more on network density, including the focus on families and teams, and nice to see some of the products like Pools that have come through this quarter. You've also had some marketing campaigns. I guess my question is, what other things can you do to grow the network and users at Cash App, the growth of which has stalled in recent quarters? As a quick follow-up, any comments on Bitcoin mining initiatives in light of the recent deal from Cold Reason Core Scientific? Thank you.
Speaker 0
Yeah, I'll start on Proto and mining. We're going to have some news very, very soon. As Amrita said, this will be as soon as next week. We're really excited about everything happening with Proto. I think we've built the best miner out there, and the market is about to see that. We'll be able to prove it. It's the most flexible and most customizable, and we built this entirely with customer feedback all online. We're going to have some really happy customers, and we're going to grow that market and take a lot of market share, I think, in mining. In terms of Cash App, it's just looking deeply at our customer base and our future customer base. We believe that we're building the money app for the next generation, and we think it's a huge opportunity for us. It's fairly untapped.
There's not a lot of folks out there doing it very well. Cash App resonates naturally with a younger crowd. It's cool. It works. It's easy. It has absolutely everything people need. Our parents are often giving their kids access to it very early, and we plan to really leverage that and make something that is even cooler and even more usable. Pools is a result of that. We looked at what people are trying to do with their money, and we came up with this concept of multiplayer money. How do you make money work in a way for multiple people at once? One incredible stat is that 60% of adults in the U.S. pool money for something.
We wanted to make something that worked flawlessly, but also allowed people to not have to get people to necessarily sign up for consent on the front for Cash App, but they can actually contribute to the pool using a method they already have, which is Apple Pay or Google Pay, and then see the full utility of Cash App and then sign up themselves because they see it's so easy. We're looking very deeply at our customers, our future customers, and this goes into the products and the features that we build, but also how we market it. We have some super creative marketing, and that's only going to get stronger and stronger as the year goes on.
The number of features and the number of products that we're going to be able to launch over this year is more than anything we've been able to do in the past because of the technology we have available to us and also the focus and all the reorganization that we did in the recent past. Now it's finally clicking, and we're seeing in the results as well. The team is very fired up to just get as much excellent product out there as we can to our customers. We are reviewing a bunch of really cool stuff, and all of it has felt like the early days of Cash App when we were building something that felt a little bit impossible, but we made it possible, we made it really cool, and it resonated the right way. That focus will pay off.
I think the days of not shipping are over. We are only as good and only a function of how quickly we can ship and how quickly we can experiment and how much we can put in customers' hands. It has never been faster.
Speaker 2
Can I just add, Hershita, that you know what we're seeing, a lot of what Jack just talked about, we launched relatively recently, between Cash App Pools just over this past week as we continue to ramp that to more customers, Tap to Pay for Cash App Business, also very recently our marketing campaign, which is a pretty buzzy and innovative way to get the message out to the next generation. Also, it's sort of over the past month. All of this is our execution is speeding up. It's all relatively recent. The early signs that we're seeing on it may be not even fully reflective in the 2Q results, but have been extremely encouraging in terms of the metrics that we look at from an actives and an active engagement perspective.
Clearly, some early signs of success in reinvigorating network growth in Cash App, and we expect that to start showing results as we head into 2026. That's part of the conviction that we had as we thought about raising guidance in the back half of the year as well, just on the execution for some of the very recent product and go-to-market initiatives from a Cash App perspective.
Very helpful. Thank you.
Speaker 3
Your next question comes from a line of Dan Dolev from Mizuho. Your line is open.
Hey, guys. Really good results. Great job on growing everything, including the borrow product. I do have a question. We're getting a lot of inbounds on it this afternoon on this topic. I did want to understand a little bit better how the borrow thing is evolving as it gets bigger as part of the business. Maybe, you know, Amrita, can you opine on the gross margin profile in terms of like, you know, what % is it? Is it 100%? Maybe touch on quantifying the puts and takes on the step up in losses, again, because we're getting a lot of questions about this. Overall, great job on growing this and making a big business. Thank you.
Speaker 2
Again, yeah, sure. Happy to talk more about Borrow. Obviously, performance very strong this quarter. Origination volume almost doubled year over year to $18 billion on an annualized basis in the second quarter, and now at the 6 million monthly actives in June. We expect that strength to continue as we roll out Borrow to more states now under the SFS originations. We also published, I'd point you towards our investor slides, which outline our annualized net margin, or ANM. This is a big, you know, a metric that we look at to measure the successful performance of the product and the unit economics of the product. What we see there are the strong economics at 24% margins in the second quarter, which is above our 20% margin threshold. You see multiple quarters really in that mid-20% range, even as we continue to ramp Borrow meaningfully.
We also see Borrow, first and foremost, as a strong product on its own, but also a key part of the engagement strategy for the Cash App banking strategy that we noted earlier, because we know our customers really value access, fast access to liquidity. As we noted, we're going to be testing higher Borrow limits for our paycheck deposit actives and explore other ways that we can use Borrow to drive engagement across Cash App. On the loss point, taking a step back from Borrow specifically, the core asset that we're leveraging to power Borrow and also post-purchase on BNPL on Cash App Card is Cash App's internal credit score. It's our internal custom credit scoring mechanism, incorporating data across our customers in how they're using Cash App to inform an underwriting decision and eligibility for our customers.
It's continuously updated, absorbs data across Cash App's ecosystem to assess basically where we can underwrite our customers, whether we can, and then at what credit limit we can. We put out a white paper recently that talks to this, but as we look at our credit model, our internal credit model can approve 38% more customers compared to Vantage Score at the same loss threshold, which means that we can effectively expand access to people who are sort of left out of or underserved by the traditional financial ecosystem. We're pretty excited about what Borrow has been able to do, all while maintaining loss rates in that sort of 3% or less range with strong unit economics.
Great. Thank you, Amrita. Really nice to see how this business is evolving. Great job.
Thank you.
Speaker 3
Your next question comes from a line of Matthew O'Neill from FT Partners. Your line is over.
Yeah, hi. Thanks, Jack and Amrita, for taking the question. I just wanted to drill in and hear some early observations, particularly around the rollout of new hardware and, stellar, notably the Square Handheld. Curious if you're seeing anything around TAM expansion, win rates, improved retention, or anything else that would be good to share here. Thanks.
Speaker 0
Yeah, we've been super excited about Square Handheld. It's definitely our best form factor yet. We packed a lot in, and again, we listened to our customers on what their needs are and made something that's super portable, super affordable, and extremely durable. What's most interesting about it is that it scales to multiple types of commerce, not just for the restaurants. It can be used in a retail setting or a service setting. It's by far, in a way, our most flexible, and I think one of the most flexible in the industry. We launched it in the U.S. in Q2, and we're starting to roll it out internationally right now. We're super excited about it. Hardware has always been a big driver for us, and we think it will continue to be.
It makes for a very easy sale, especially to our newer customers or winning sellers away from others. Of course, it's not the only driver. The other thing that I think is going to be quite powerful over the next year or so is going to be Square AI. This is getting more and more sophisticated. We started with just the ability for our customers to quickly get more customized reports. As we said a few earnings calls ago, we want this to effectively act as a virtual COO, virtual manager, if you will, to help folks manage their business of any type, whether it be a restaurant, retail, or service, and at any scale. The team has been working super hard and fast on making sure that it really lives up to that promise.
We're starting in the dashboard because that's where all of our sellers spend the majority of their time. It's also our one opportunity to introduce them to the entire Square ecosystem so that we can introduce them to a lot of our other services, including banking and customer relationship management. It's a really good flywheel for us, and it allows us to put a natural, intuitive, language-first option on all the complexity of our ecosystem that we can offer sellers in a much simpler way. The other big feature that we announced recently was enabling Bitcoin acceptance on Square. This is early, but we think it's a big one. We think it's a good complement to everything that we're doing. There's also been a lot of talk about stablecoins.
Our philosophy at Square has always been to accept every form of payment that comes across the counter, and we're certainly going to enable our sellers to accept every form of payment, including Bitcoin or Tether or Circle, anything that people are actually using to pay for goods and services. We're going to enable our sellers to accept because it means they always make the sale, and that's really critical to us. Those three, the hardware, our AI efforts within the dashboard and the app itself, and then new forms of payments, set all of our sellers up for a much more comprehensive and flexible offering and operation. We pair that with just a much stronger go-to-market and sales. Our marketing releases, our last marketing release, we're doing this twice a year, was a hit, and we can't wait for the next one.
Everything that Nick and team have been doing with field sales and just really refining our approach is starting to show the effect, and that's from all scale of our sellers, from the very small to the very large. I think it's a perfect formation such that we can really compete on the merit of our offerings, which I think are immense.
Thanks, Jack. Appreciate it.
Thank you.
Speaker 3
We will now take our last question from the line of Dave Koning from Baird. Your line is open.
Yeah, hey guys, great job. Thank you. I guess you touched on the willingness to accept stablecoins at your sellers. I was just thinking more broadly, you focus so much on Bitcoin historically. Kind of what's your philosophical thought around stablecoins? You know, where do you think it's going to be most useful and how might you guys play within the broader stablecoin ecosystem?
Speaker 0
I think the most important thing is if people want to use it to purchase or if they want to use it to transact or transmit money through Cash App, we're going to support it. You should expect Square and Cash App to support these things if people are using them, and we would focus on the major ones in use. We do have a bank and we can offer our own stablecoin, and there are a lot of stablecoins being generated right now. I don't necessarily always see the product-market fit for all of them. I don't see the differentiator. It really comes down to what are people using and why are they using it. Right now, stablecoins are predominantly used in a remittance use case. If they do become more payments-oriented, we'll be there.
I don't think right now that it makes sense for us to offer our own because I just don't think there's a huge differentiator above and beyond what exists, and in my view, above and beyond what Bitcoin provides. Bitcoin still stands alone in it being entirely net new, and it has properties that none of these stablecoins have, which make it a better form of currency than the rest of them. It's certainly proven the case over 16 years as a store of value. Our intention is to make sure that Bitcoin becomes a native currency of the internet, and that's used as everyday money. We think it can get there very quickly. The reason to focus on that is because it's independent of any one particular corporation or any government.
It allows us to move much faster with our business, as it does become more and more of a standard, not only a store of value, but remittance and also payment that allows Square to go to every single market almost instantly. The same is true for Cash App as well. We're huge believers in it. We know it's going to be a long road. It's a protocol. Protocols move a lot slower than products and companies tend to do, but they tend to last longer as well. That's why we believe in it so much, and we think it massively accelerates our business when it does hit, and we intend on making it hit as soon as possible.
Great, thank you.
Speaker 3
Ladies and gentlemen, thank you for your participation in today's program. This does conclude the program. You may all disconnect.