Block Levels Up: What S&P 500 Inclusion Means for Investors

Key Points

• The company's addition to the S&P 500 index creates significant new demand from institutional investors.
• Cash App is successfully shifting its strategy from user growth to increasing profits from its large, established user base.
• The Square merchant business is gaining market share by successfully expanding its services to attract larger, more valuable business clients.

Shares of Block NYSE: XYZ have surged after the announcement that the financial technology company will join the prestigious S&P 500 index. This milestone validates the company’s evolution from a niche payment innovator to a diversified powerhouse in the financial sector, positioning it among the largest and most influential public companies in the United States.

The immediate stock rally (pushing the stock up around 11%) reflects the significance of this news. For investors, the central question now is whether the company’s underlying business fundamentals can support this new, higher valuation and drive further growth long after the initial excitement of being included subsides.

Why Joining the Index Ignited the Rally

Block’s addition to the S&P 500, effective at the market open on July 23, provides more than a symbolic victory; it creates a tangible lift for the stock. The S&P 500 is the primary benchmark for the U.S. stock market, with trillions of dollars in passive index funds and ETFs designed to replicate its holdings.

This creates a market event that analysts refer to as forced buying. For these massive funds to do their job, their managers must purchase Block shares for their portfolios. This generates a significant, near-term wave of demand independent of the company’s day-to-day performance.

Beyond this initial demand surge, the inclusion brings lasting benefits that can enhance shareholder value. It introduces the company to a broader base of institutional investors, which can lead to greater trading liquidity and potentially more stable price action over time.

This event has already acted as a catalyst on Wall Street, prompting a series of positive analyst revisions and price target upgrades for Block, reinforcing the market’s renewed confidence in the company’s trajectory.

Analyzing Block's Path to Future Profits

While index inclusion provides a strong boost, a company's long-term value is always determined by the performance of its core businesses. A closer look at Block's two primary segments, Cash App and Square, reveals a clear and actionable strategy for accelerating growth.

Cash App: From Users to Profits

The story for Cash App has evolved. With a massive and stable base of 57 million monthly active users, the company’s focus has pivoted from pure user acquisition to deeper monetization. This strategy is already yielding results: in the first quarter of 2025, gross profit per active user increased 9% year-over-year to $81.

Two key initiatives are expected to drive this monetization further. First, the nationwide expansion of Cash App Borrow, a short-term lending product, is now underway following recent approval from the FDIC. This move nearly doubles the product’s addressable market within the app’s user base, unlocking a significant high-margin revenue stream. 

Second, the formal integration of Afterpay’s Buy Now, Pay Later (BNPL) service directly into Cash App creates a powerful tool to drive commerce and credit adoption, making the platform more comprehensive for users to manage their finances.

Square: Capturing the Mid-Market

The Square ecosystem, which serves merchants, is demonstrating its competitive strength. In the first quarter, the segment’s 9% gross profit growth outpaced the broader payments industry, a clear signal that it is taking market share.

This success is fueled by a deliberate push upmarket to serve larger, more complex businesses. Growth from sellers with over $500,000 in annualized sales is now accelerating faster than any other demographic.

This strategy is proving effective, with Square recently signing partnerships with multi-location businesses, such as the 60-location chain Bambu Dessert Drinks, which chose Square for its advanced backend capabilities.

This move upmarket increases payment volume and creates stickier customer relationships through integrated software, payroll, and banking services.

Can Block Deliver on Its Promises?

Management has set clear expectations for the remainder of the year. The company is guiding for an acceleration of gross profit growth through the second half of 2025, with a target of exiting the year in the "mid-teens" growth range.

The upcoming second-quarter earnings report, scheduled for August 7, 2025, has now become a critical event. It will offer investors the first significant data point to validate whether this growth story is on track.

The S&P 500 inclusion has provided a strong catalyst and a vote of confidence from the market, establishing a new, higher valuation floor for the stock. Sustaining and building on this momentum will now depend on execution.

Block's ability to deliver on its well-defined strategies for monetizing Cash App and expanding Square's upmarket presence will hold the key to the stock's long-term performance.