Block, Inc. (XYZ) stock intrinsic value fair value estimate & owner earnings analysis

Block runs two consumer and merchant payment ecosystems: Square, which serves sellers, and Cash App, which had 59 million monthly transacting actives in the United States as of December 2025 and brought in $316 billion of inflows during 2025. It also earns revenue from bitcoin sold to customers (booked gross as a sale, with the bitcoin purchase cost shown as a cost of revenue), and from lending and consumer receivables. 2025 revenue was $24.2 billion, about 92% of it from the United States. How we measure earnings: we start from operating cash flow, remove the swings in settlement and customer-balance timing (settlements receivable, customers payable, settlements payable), deduct stock-based compensation as a real cost (it was $1.2 billion in 2025, roughly $1.95 per share), and deduct only the part of capital spending needed to maintain the business. On that basis owner earnings per diluted share were about $2.13 in 2025 and $0.34 in 2024, but negative in 2022 (about -$1.44) and 2023 (about -$1.58). We anchor on roughly $1.20 per share, a rounded-down midpoint of 2024 and 2025 ($1.23). We use only those two years because 2022 and 2023 look like a different pattern, with operating cash flow very low (about $176 million in 2022 and $101 million in 2023) while stock compensation exceeded $1 billion a year. We stop short of using the 2025 figure alone because one strong year does not make a trend: 2024 was $0.34, and 2025 operating cash flow was helped by a $335 million deferred tax add-back. Six-month 2026 operating cash flow of $1.99 billion, against $0.51 billion in the same period of 2025, is consistent with the stronger level holding, but we could not remove working-capital swings from those interim figures, so it did not move the anchor. Growth check: owner earnings rose from $0.34 to $2.13 per share in 2025, but our base case assumes no growth from the $1.20 anchor. We credit no growth at all in any case. Revenue was nearly flat in 2025 (up 0.3%), and we found no secured contract or repeatable, self-funded expansion pattern that would put further growth in the bag. New products, share gains and lower costs are left out. Base case, about $11.50 per share: owner earnings stay at $1.20 for ten years, then decline in equal annual steps, reaching zero in year 21. We let earnings persist for a decade because of the existing Cash App and Square user base, and fade them afterwards because we cannot name a mechanism that renews them. Bear case, about $2.90 per share: owner earnings fall back to the 2024 level of $0.34 for ten years, then decline in equal annual steps, reaching zero in year 16. Named risks: credit costs are rising, with loan losses up from $323 million to $821 million in 2025 and consumer receivable losses up from $273 million to $314 million; the company has issued $2.2 billion and $2.0 billion of senior notes in recent years; and owner earnings were negative in both 2022 and 2023. Bull case, about $22.10 per share: owner earnings hold at about $2.12 (the 2025 level) for ten years, then decline in equal annual steps, reaching zero in year 26. This requires no growth, only that 2025 proves to be the normal level and that the business's existing network keeps generating cash for longer. Accounting judgements and open points. Stock compensation is deducted in full. Amortisation of customer and other acquired intangibles is added back automatically as a non-cash charge ($136 million in 2025); we carry that decay in the fade periods rather than adjusting the earnings level. We left loan purchases and sales, and charge-offs, inside owner earnings, since they carry realised credit losses. We could not fully reconcile the lending cash flows. Cash flow from operations is reduced by $1.14 billion of discount and premium amortisation and other non-cash adjustments and increased by $1.34 billion of non-cash loss provisions, while the related cash sits in investing: in 2025 consumer receivable collections exceeded originations by $0.79 billion, but originations of loans held for investment exceeded repayments by $3.55 billion. These offsetting effects are outside our owner earnings figure, and we did not attempt to estimate them. Six-month 2026 net loss was $220 million (a $88.5 million profit in the second quarter), against a $728 million profit in the first half of 2025; we did not establish the cause from the filings, and it is a reason the anchor is set below the 2025 result. What would make this wrong: if the 2025 level proves to be the norm and grows, the value is above our base; if stock compensation stays near $1.2 billion while cash flow returns to 2023 levels, owner earnings would be negative and the shares are worth much less than our bear case.