Afterpay Limited

Basis of preparation. Afterpay's last standalone audited accounts were for FY2021 (year to 30 June 2021). Section 6A gives Afterpay's legacy listed-company financials. Section 6B gives the current listed parent (Block, Inc.) for FY2021–FY2025, as presented in the FY2025 Form 10-K comparative data (via EDGAR-derived tables).

6A. Afterpay Limited — legacy financials

Sources: Afterpay FY2021 Annual Report and FY2021 trading update (ASX, 25 August 2021); H1 FY2021 ASX release; FY2020 derived from reported growth rates. FY2020 Afterpay Income is derived from 822.3/1.90 and should be confirmed against the FY2020 Annual Report. FY2017–FY2019 Underlying Sales are from company results announcements. FY2018–FY2019 income figures should be confirmed against the respective annual reports.

Commentary (legacy). Underlying Sales compounded at about 106% a year from FY2017 to FY2021. This was driven by:

• US hyper-growth: North America was A$9.8bn in FY2021, +177% in local currency;

• UK launch: Clearpay grew +242%; and

• rising frequency: the top 10% of ANZ customers transacted more than 60 times a year.

Unit economics were stable:

• Afterpay Income margin was about 3.8% of Underlying Sales.

• Net Transaction Margin was about 2.2% (H1 FY2021).

• Gross losses improved to 0.7% of Underlying Sales in H1 FY2021, from 1.0%.

Statutory losses widened mainly because of non-cash items. In FY2021 the key item was a A$96.8m net loss on financial liabilities at fair value, linked to the Clearpay put-option liability to ThinkSmart. Heavy marketing and global expansion costs also contributed. EBITDA excluding significant items fell 13% in FY2021 to A$38.7m.

6B. Block, Inc. (current parent) — income statement: notes and sources

Source: Block Form 10-K FY2025 and prior 10-Ks (EDGAR-derived consolidated statements). FY2025 revenue is exactly US$24,193.7m against US$24,121.1m in FY2024. The FY2024 tax benefit reflects release of a deferred tax asset valuation allowance.

6C. Block — margins and growth (%)

Derived from 6B. FY2021–FY2025 CAGRs:

Revenue: ~8.2%: - Gross profit: ~23.7%

Revenue is distorted by bitcoin pass-through sales. The bitcoin ecosystem was 35% of FY2025 revenue but only 4% of gross profit, against 43% and 5% in FY2024 (FY2025 10-K). Excluding bitcoin, FY2025 revenue grew about 14%.

6D. Block — balance sheet

Source: EDGAR-derived 10-K data.

Key observations:

• The FY2021→FY2022 jump in total assets (+US$16.3bn) and equity (+US$13.9bn) reflects the all-stock Afterpay acquisition and the goodwill and intangibles recognised on it. The exact goodwill figure is n/d here; see the FY2022 10-K business combination note.

• Loans held for investment rose sharply in FY2025 (to US$3.4bn). This reflects Cash App Borrow moving onto the balance sheet through Square Financial Services.

• Total liquidity was US$8.8bn at 30 June 2026 (Q2 2026 KPI disclosure).

• One aggregator shows debt/equity of about 0.34x (TTM, July 2026).

6E. Block — cash flow

FY2025 buybacks were US$2.3bn, including US$790m in Q4 2025 (11.9m shares). One aggregator shows TTM free cash flow of about US$3.3bn (July 2026).

6F. Block — ratios (derived)

The cash conversion cycle is not meaningful for a payments/credit business.

6G. Trend commentary

1. Gross profit is the true growth metric. Gross profit more than doubled, from US$4.4bn (FY2021) to US$10.4bn (FY2025). Revenue was flat over FY2024–FY2025 because of lower bitcoin trading volume.

2. Operating leverage inflected in FY2024–FY2025. Operating income swung from a US$625m loss (FY2022, the first year with Afterpay costs) to US$1.7bn profit (FY2025). Operating expenses grew only 8% in FY2025 while gross profit grew 17%.

3. FY2024 net income is inflated by a roughly US$1.5bn one-off tax benefit. FY2025's US$1.3bn is the cleaner run-rate.

4. 2026 momentum:

   • Q2 2026 gross profit was US$3.17bn (+25%).

   • Adjusted operating income was US$864m (+57%).

   • GAAP operating income was US$447m (down 8%). The decline reflects restructuring and higher go-to-market spend.

   • Q2 2026 GAAP net income attributable fell to US$88.5m, from US$538.5m. The swing came from a US$88.5m loss on bitcoin remeasurement, against a US$212.2m gain a year earlier.

5. Balance-sheet credit intensity is rising (consumer receivables plus loans held for investment). This increases sensitivity to consumer credit cycles, which is directly relevant to Afterpay.

Management guidance (Block, August 2026)

• FY2026 gross profit: US$12.51bn (+21%).

• FY2026 adjusted operating income: US$3.47bn.

• Q3 2026 gross profit: US$3.13bn (+18%); adjusted operating income: US$875m.

• No Afterpay-specific guidance is provided.

Bull case

1. Card-attached BNPL is a new growth engine. Post-purchase BNPL went from launch to more than 1m monthly actives within about four months. Pre-purchase BNPL already accounts for 17% of enabled card spend. Together they let Afterpay monetise Cash App's 59m actives without merchant integration.

2. Operating leverage after the restructuring. Adjusted operating income rose 57% in Q2 2026 on 25% gross profit growth. A ~40% leaner organisation could sustain Rule-of-40-plus performance.

3. Enterprise merchant momentum and regulatory moats. Wins at Fanatics, Endeavour Group and Amazon Australia, together with licensing regimes in Australia and the UK, favour well-capitalised incumbents.

Bear case

1. Share loss to Klarna and Affirm. Afterpay's ~17% GMV growth trails faster-growing peers, and Klarna's quarterly GMV is roughly four times Afterpay's.

2. Credit-cycle exposure. Consumer receivables and loans on Block's balance sheet exceed US$6bn. A US consumer downturn could hit loss rates just as volumes scale.

3. Execution and disclosure risk. Afterpay no longer has dedicated founder leadership, its standalone metrics are shrinking in disclosure, and the 2026 headcount cut could strain risk, compliance and merchant support functions.

Catalysts and monitorables (next 12 months)

Analyst verdict

Afterpay no longer exists as an investable standalone security. Its story is now part of Block's investment case, and the evidence suggests it has become a useful but secondary contributor to that case.

The legacy record is impressive. Underlying Sales rose from A$561m in FY2017 to A$21.1bn in FY2021, with steady merchant take rates near 3.8% and net transaction losses around 0.5–0.6% of sales. That record shows a disciplined credit model at scale.

The acquisition, however, was priced at the peak of the 2021 fintech cycle. Measured by Block's share price, which fell from roughly US$247 at announcement to about US$74 today, much of the headline US$29bn value has been lost to shareholders.

Inside Block, Afterpay's role has changed. It is no longer a merchant-funded instalment provider competing on checkout buttons. It is increasingly a consumer-funded credit feature on the Cash App Card. This is the right strategic pivot. It uses Block's distinctive asset, a large debit-centric consumer network, and it reduces dependence on enterprise merchant negotiations where Klarna and Affirm are strong. Early adoption data (more than 1m post-purchase monthly actives; 17% pre-purchase share of enabled spend) supports the thesis.

At the parent level, fundamentals are improving:

• gross profit growth accelerated to 25–27% in H1 2026;

• adjusted operating margins expanded to 27% of gross profit; and

• FY2026 guidance has been raised three times.

The main risks are credit-cycle exposure on a growing on-balance-sheet loan book, tighter regulation in Australia and the UK, and execution risk after a ~40% workforce reduction.

Verdict: Afterpay is now strategically valuable and improving operationally, but no longer separately transparent. Investors should judge it through Block's Cash App gross profit per active, consumer-lending origination volumes and credit-loss disclosures. At roughly 15x forward earnings, Block offers reasonable exposure to this optionality. Afterpay alone does not justify a premium until Block restores granular BNPL disclosure.