Java provides a method to check whether a character is a digit. For this you can use Character.isDigit(char).
public static String squareNumbers(String input) {
    StringBuilder output = new StringBuilder();
    for (int i = 0; i < input.length(); i++) {
        char c = input.charAt(i); // get char at index
        if (Character.isDigit(c))  // check if the char is a digit between 0-9
            output.append((int) Math.pow(Character.digit(c, 10), 2)); // square the numerical value
        else
            output.append(c); // keep if not a digit
    }
    return output.toString();
}
This will iterate any passed string character by character and square each digit it finds. If for example 2 digits are right next to each other they will be seen as individual numbers and squared each and not as one number with multiple digits.
squareNumbers("10") -> "10"
squareNumbers("12") -> "14"
squareNumbers("abc2e4") -> "abc4e16"