Block beats expectations, but its bitcoin ambitions take a hit as prices fall

payment company, blockagewhich beat analysts’ expectations this quarter, but bitcoin — the company’s key focus — has yet to make a meaningful contribution to its earnings.

Led by Bitcoin advocate Jack Dorsey, the company has devoted significant resources to making cryptocurrency a part of its Launched Bitcoin trading on its payment platform Cash App in 2018 Since then, the company claims about 10 million users have used the feature, according to Second Quarter Shareholder Letter Released on Thursday.

In June, Block further added a feature called “rounding,” which allows users to round up to the nearest dollar when using a Cash App card and deposit excess change in stocks or bitcoin.

Of course, the company Change its name from Square to Block Late last year, it showed how committed it is to the blockchain technology that underlies Bitcoin.

But in its second-quarter earnings report on Thursday, Block’s bitcoin efforts had little success. The company reported that Bitcoin revenue from Cash App fell to $1.79 billion, down 34% year over year. Bitcoin revenue accounted for about 41% of Block’s total second-quarter revenue of $4.4 billion, but only translated into about 3% of the company’s overall gross profit — a metric that’s more important to analysts.

Stephen Biggar, head of financial services research at Argus Research, said: wealth Bitcoin “has a very limited impact on profitability and is not a driver of earnings forecasts.” Biggar noted that while the company’s bitcoin revenue was $1.79 billion, its bitcoin costs of $1.74 billion largely offset it, about 98% of its revenue.

Block’s bitcoin gross profit fell to $41 million from $43 million in the first quarter. In the second quarter alone, bitcoin prices plunged 50%, and 66% from an all-time high of nearly $69,000 in November.

In addition to bitcoin profits, falling cryptocurrency prices also hit the company’s bitcoin holdings. Block’s bitcoin investment, which has invested $220 million in 2020 and 2021, is still profitable, but the company also took a $36 million impairment charge on its investment in the second quarter due to the price drop.

Block’s lackluster returns from bitcoin aren’t the only concern, Biggar said, noting that upcoming U.S. government regulation has also created uncertainty.

“In general, the end result of bitcoin and cryptocurrencies, and the pitfalls of upcoming regulation, are not very clear,” he said.

All of these pitfalls haven’t stopped Dorsey from incorporating bitcoin into his grand vision of a “super app” to combine Block’s bitcoin transactions, Afterpay business, peer-to-peer payments, and more into one app. Ultimately, Dorsey wants to build something that customers use every day. Bitcoin is a key part of that, he said Thursday.

“We can build something that is at least weekly, bi-weekly use cases, and then get more and more daily use cases, which is ultimately our goal. We see Bitcoin taking a step towards that …” Dorsey said.

Bullock did not immediately respond wealthrequest for comment.

Although Block’s overall gross profit of $1.47 billion was slightly below the $1.48 billion expected by Factset analysts, Block’s stock fell more than 6% in premarket trading. Its gross profit was up 29% from the $1.14 billion profit the company recorded a year ago. Block reported earnings of $0.18 per share, beating analysts’ estimates of $0.16, according to Factset.

Shares of Block were up 1% Friday morning at $90.

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