Block Inc. (SQ, Financial), a financial services and mobile payment company, reported third-quarter revenue below analysts' expectations, triggering a sharp decline in its stock during post-market trading. Known for its popular Cash App, Block is gradually closing its decentralized finance unit TBD to redirect resources towards other cryptocurrency-focused ventures.
In its latest earnings report, Block, formerly known as Square, announced plans to allocate more resources to Bitcoin mining initiatives and its Bitcoin self-custody wallet, Bitkey. The company is also reducing its investment in the music streaming platform Tidal, optimizing investments based on progress.
In August, Block disclosed receiving a draft consent order from the Consumer Financial Protection Bureau concerning an ongoing investigation into Cash App's handling of customer complaints and disputes. The company is in discussions with the agency to resolve this matter.
Block's stock plummeted over 15% in post-market trading but later trimmed losses to under 3% as the market focused on its revenue results, which fell short of Wall Street's expectations. Year-to-date, the stock has dipped approximately 2.7%, underperforming the S&P 500 and Nasdaq Composite Index due to slowing growth and increased competition in online payments.
Block's quarterly net revenue grew only about 6% year-over-year, reaching approximately $5.98 billion, falling short of analysts' average estimate of $6.24 billion. Revenue from Bitcoin and Cash App, which includes Bitcoin-related revenue, also missed expectations, totaling $2.43 billion and $3.93 billion, respectively, for the latest three-month period ending in September.
Last year, CEO Jack Dorsey announced a workforce cap of 12,000 employees to improve cost efficiency, with Tidal undergoing significant layoffs. Known for Cash App's peer-to-peer transfer service and its payment terminal Square, Block faces competition from PayPal's Venmo and global online payment leader Stripe.
Block is shifting towards loans by aiming to offer a full suite of banking services for Cash App users. It plans to expand its "Buy Now, Pay Later" service, Afterpay, on Cash App's virtual card.
Looking ahead, Block reaffirmed its 2024 full-year gross profit target of at least $8.89 billion, up 18% year-over-year. The company raised its adjusted EBITDA forecast to $3 billion, above the previous estimate of $2.9 billion, and increased its adjusted operating profit outlook to $1.56 billion from $1.44 billion.
Block, led by Twitter founder Jack Dorsey, includes well-known mobile wallet services like Cash App and Square, and Afterpay, a leader in the "Buy Now, Pay Later" segment.
Cash App allows users to generate personal QR codes for quick, simple money transfers and supports stock and cryptocurrency purchases. It aims to provide a seamless payment solution with features like income and expense tracking.
Square, initially recognized for its credit card readers for small merchants, has evolved into a comprehensive business service platform, offering POS systems, online store creation, inventory management, employee management, and data analytics.
