Shares of Block experienced a significant drop of nearly 8% on Friday, driven by disappointing third-quarter earnings that fell short of analysts’ expectations. The company, which is known for its Square payment service, reported earnings per share of 54 cents on an adjusted basis, compared to the anticipated 67 cents. Furthermore, its revenue for the quarter came in at $6.11 billion, lagging behind the expected $6.31 billion. Although revenue increased by 2% year over year, the overall performance has led to a 24% decline in Block’s stock price since the beginning of the year.
One area of concern was the growth of Square’s gross payment volume, which rose 12% year over year. However, the growth in gross profit for the point-of-sale service showed signs of slowing, reaching only 9% compared to the previous year, down from 11% growth in the last quarter. Block attributed this deceleration primarily to a change in processing partnerships and sales from lower-margin hardware.
In contrast, the Cash App segment demonstrated stronger performance, with gross profit reaching $1.62 billion, reflecting a remarkable 24% increase year over year. The growth was fueled by services including Cash App Borrow, Cash App Card, and Buy Now Pay Later, leading to 58 million monthly active transacting users. Morgan Stanley analysts noted their optimism regarding the pace of credit expansion at Cash App, expressing interest in whether this growth would enhance inflows per active customer and boost direct deposit accounts.
Block’s Chief Financial Officer, Amrita Ahuja, highlighted gross profit as a “bright spot” for the company. The overall gross profit for Block amounted to $2.66 billion, an 18% increase from the prior year, exceeding FactSet’s expectations of $2.60 billion for the quarter. Additionally, the company raised its guidance for the full-year gross profit forecast, now estimating a total of $10.2 billion for 2025, up from previous projections.
Block reported a net income of $461.54 million for the quarter, translating to 74 cents per share, showcasing a substantial improvement from last year when it reported a net income of $283.75 million, or 45 cents per share. This positive development in net income reflects the company’s ongoing efforts to navigate a challenging economic landscape while capitalizing on growth opportunities in its various segments.
