Block aims for financial ubiquity

For financial services giant Block, shifting business models via a reorganization in 2024 has allowed it to better serve both merchants and consumers, CFO Amrita Ahuja told CFO Brew.

Its well-known fintech apps—Square (point of sale), Cash App (mobile P2P payments and investing), and Afterpay (buy now, pay later)—now have “a shared infrastructure and shared even talent—people at the company who are thinking about the brands collectively…What that allows us to do is look for the connecting points across the brands, things that we can uniquely do because we serve both sides of a network,” Ahuja, Block’s CFO for more than seven years, said.

Block recently reported record profitability and raised its yearly outlook; it’s now expecting gross profit of $12.5 billion, up 21% year over year. Ahuja told CFO Brew about the impacts of hardware and memory price increases on Block’s business, what stood out in the company’s second-quarter performance, and how Block is leveraging AI.

How have heightened hardware and memory costs affected Block?

When we go back to, what are the things that are unique about Block relative to our competitors, I would say our hardware capabilities is one of those things. The fact that we have such deeply integrated hardware, software, and commerce capabilities, that we haven’t outsourced this to some other company that’s an expert, but built our own expertise…The memory shortage and associated cost increases are pretty unprecedented for this time. We can mitigate the negative impacts of a moment like this because we are so deep in the supply chain, and we have direct connections not only to our suppliers for hardware and memory and chips, but to our suppliers’ suppliers, and to their suppliers.

We saw over a year ago that this crunch was coming, based on the signals we were getting throughout the supply chain, and were able to plan ahead as a result: buy memory chips earlier, ahead of the significant cost advancement, and mitigate the costs that we’re seeing today. That’s not to say that it hasn’t impacted us, that’s not to say that we’re immune, but it is to say that we’ve got core capabilities that have dampened the impact.

What was a highlight of Block’s latest earnings for you?

Our product strategy is resonating, and when you unpack that underneath the hood, what does this mean for our customers? It means they are getting products at a faster clip from us, and I think a lot of that is AI-driven, centered work, which we have really oriented our business around now. So for instance, Square, we released 130 product features in the first half of this year; that’s three times more than we released in the first half of last year. And by the way, we have fewer people at the company this year now than we did last year, and so a lot of this is greater focus, a strategy that’s working, greater accountability and lines of ownership, and having the best AI tools at our fingertips.

How is it translating what can be sometimes complex numbers and systems to investors to give them peace of mind, especially at a time like this?

I think you need the longer-format storytelling, and you need the customer-based examples and case studies and stories…For a business like ours, which is pretty unique, and the nexus of so many different commerce and financial services businesses, the most important thing that we can do is simplify, but not abstract away the depth of the business; to still be able to convey the true uniqueness and the true moat that we believe we’re building in our business.

Sometimes you just have one-to-one questions, and so [our] IR bot helps us scale the impact of the IR team. It’s trained on all of our…investor-facing and sort of broader public-facing materials. We’ve been testing it internally for months now. One of the roles I had prior to becoming a CFO was running IR at another company [Activision Blizzard]. I know how important it is for investors to get access to this sort of stuff and how things change over time, and they just want to have the latest answer. And so now we have with AI the capabilities to be able to bring this sort of visibility and this sort of ease of access at a much wider scale. Also, I would say since I was in IR, the thing that has really transformed the markets is the growth of the retail channel, and we have a relatively small IR team, and they don’t have the ability to, unfortunately, speak to every investor or every potential shareholder. And so now we do have a way to answer everyone’s questions through the IR bot.

Block works a lot in the consumer landscape; how is the company meeting consumer customers where they’re at right now in terms of macroeconomic impacts?

From the consumer aspect of the business, what I would say with Cash App and with Afterpay is that we increasingly serve younger customers, and we serve who we call the modern earner…Modern earners are the younger generation who are making a living, earning an honest living, but not necessarily in the way that prior generations might have: not the traditional W2 single employer paycheck, but bringing it together through a number of different ways, from the gig economy to solopreneurs, entrepreneurs, in multiple different ways, and we see that the Cash App platform has about 50% of those modern earners and hourly workers…The way the traditional financial institution is architected today is to serve people with a W2 direct deposit paycheck; it is not architected to serve people the way Cash App is serving them.