clogged Third-quarter revenue reported Thursday fell short of Wall Street expectations. The stock initially sold off after hours but erased most of its losses as investors focused more on profitability metrics.
Here’s a look at the company’s performance, compared to the London Stock Exchange Group analysts’ consensus estimates.
- Earnings per share: Adjusted 88 cents, expected 87 cents
- income: $5.98 $1 billion vs. $6.24 billion expected
Block finance chief Amrita Ahuja told CNBC that analysts are more focused on gross profit than revenue, noting that the company’s earnings growth and performance have been better than expected.
Block (formerly known as Square) reported gross profit of US$2.25 billion, an increase of 19% over the same period last year. Company reports net profit The company’s shares fell $283.7 million, or 45 cents a share, after losing $88.7 million, or 15 cents a share, a year ago.
The Cash App business, the company’s popular mobile payments platform, was also a significant contributor to overall profitability, with gross profit of $1.31 billion, down from 21% Year-over-year jump. Block, run by Twitter co-founder Jack Dorseysaid that monthly active users of its Cash App Card grew 11% year-on-year to more than 24 million.
Payments totaled $62.4 billion, below analysts’ expectations of $64.3 billion. However, the company has improved its cost structure. Block said fourth-quarter gross profit will grow 14% to $2.31 billion.
When it comes to earnings, analysts focus on the company’s “buy now, pay later” segment. Block acquired Australian BNPL company Afterpay in 2021 for $29 billion.
Chief executive Jack Dorsey explained the company’s loan products, including Square Loans, Afterpay Buy Now Pay Later and Cash App Borrow, in his quarterly shareholder letter. He said that when the company launched Afterpay on Cash App Card, it wanted to transform Cash App Cards into “a better alternative to credit cards.”
Ahuja told CNBC that the company’s loan products use artificial intelligence to enable “smarter, faster” decisions and help Block “manage risk and flexibly underwrite” consumers and small businesses.
This helps the company keep its loss ratio low on each different product, she said. Interest rates on buy now, pay later are around 1%, Cash App loans are around 3%, and Square loans are around 4%.
“Loans are the main driver of monetization for Cash App users in the future,” Kevin Kennedy, an analyst at global research firm Third Bridge, said in an email.
Kennedy said that in addition to financial services, Cash App can also help Block develop advertising business and charge merchants for promotional pricing or brand placement fees.
— CNBC’s Robert Hum contributed to this report.
