Block’s first-quarter operating earnings exceeded Wall Street’s expectations, despite a fall in overall revenue caused by a weaker bitcoin.
The firm, led by Twitter co-founder Jack Dorsey, posted operating earnings, also known as adjusted EBITDA, of $195 million, beating Wall Street’s average expectation of $136 million.
However, the company still fell short of headline revenue and earnings expectations. Over the three months ending March 31, revenue had fallen 22% to $3.96 billion.
Block’s acquisition of Afterpay and Cash App boost profit
Some highlights from Q1 include the company closing its $29 billion acquisition of Afterpay Ltd. The buy-now-pay-later pioneer contributed $92 million to the first quarter’s gross profit, while its gross merchandise value – the value of all goods sold – was expected to rise 15% in April.
This boost was recorded under Block’s Square and Cash App units, which contributed to a 26% jump in gross profit for the latter.
Yet, independent of Afterpay’s contribution, Cash App still performed phenomenally for the payments firms, reporting a $578 million in gross profit, including a 15% year-on-year bump in April. “We expect Cash App and Square to sequentially grow gross profit each quarter throughout the year, even excluding Afterpay, assuming the macroeconomic environment remains stable,” said Chief Financial Officer Amrita Ahuja.
These results came in ahead of several analysts’ estimates, who added that it signaled healthy trends. “Cash App was the standout of Q1,” wrote Barclays analyst Ramsey El-Assal, who also highlighted that monthly active users transacted an average of 21 times in March.
Ahuja also acknowledged increased transaction activity in March, which she said was augmented by growing interest in direct deposits.
Bitcoin revenue halves
Block’s first-quarter financial results also showed that the company’s bitcoin revenue had halved to $1.73 billion, due to a drop in interest from retail traders. Enthusiasm for the cryptocurrency has waned since peaking towards the end of last year when it had soared and led to a growing mainstream acceptance of digital assets.
This was also demonstrated recently when a non-fungible token of Jack Dorsey’s first-ever tweet found little interest in the resale market. Bids for the NFT, which sold for $2.9 million last year, only managed to reach a paltry $280.