Key Notes
- Block beat estimates with $6.72 billion in revenue and adjusted earnings of $1.13 per share.
- Gross profit rose 22% to $3.24 billion as Cash App and Square recorded double-digit growth.
- Block raised its full-year outlook and forecast fourth-quarter adjusted earnings of $1.15 per share.
Block (NYSE: XYZ) beat third-quarter earnings and revenue estimates and raised its full-year outlook as Cash App and Square both posted double-digit gross profit growth. Adjusted earnings came in at $1.13 per share, ahead of the $1.03 estimate, while revenue of $6.72 billion topped the $6.59 billion estimate. Shareholder letter
Gross profit increased 22% from a year earlier to $3.24 billion, above the $3.13 billion Block had projected in August. Adjusted diluted earnings per share rose 109%, while GAAP diluted earnings increased 24% to 92 cents a share. Operating income rose 5% to about $428 million, and adjusted operating income grew 92% to $923 million. Prior outlook
Cash App Leads Gross Profit Growth
Cash App gross profit rose 27% to $2.07 billion, about 64% of Block’s total. The company pointed to Cash App Borrow, Afterpay Post-Purchase and Cash App Card as drivers. Consumer lending originations rose 40% to $19 billion across Cash App Borrow and buy now, pay later products. Cash App reached 60 million monthly transacting accounts in September. Quarterly filing
Square generated $1.16 billion in gross profit, up 14%, helped by payment processing, loans to sellers and software. Square’s gross payment volume also grew 14%. Cash App and Square earn money through different channels, so growth in card use and lending can support Cash App even as sellers’ payment activity drives Square.
Bitcoin illustrates why Block emphasizes gross profit alongside sales. Its bitcoin ecosystem generated $1.80 billion in revenue, down from $2.02 billion a year earlier. Block records the sale price of bitcoin it sells to customers in revenue and the cost of acquiring it in cost of revenue. Cash App’s bitcoin ecosystem gross profit fell 50% as the company reduced fees on certain transactions.
Block Raises Full-Year Guidance
For the fourth quarter, Block expects gross profit of $3.315 billion, up 15% from a year earlier, and adjusted operating income of $1.005 billion. The company projects adjusted diluted earnings of $1.15 per share, matching the estimate.
Management raised its full-year targets to $12.626 billion in gross profit, $3.519 billion in adjusted operating income and $4.15 in adjusted diluted earnings per share. The holiday quarter will show how much seller activity contributes to Square’s results and whether Cash App lending and card use can sustain the pace of growth.
Block’s report follows results from other payments companies, including the Mastercard earnings we previously covered.
