Block Inc Shares Surge 8% Following Strong Q1 Performance Amid Bitcoin Revenue Decline
Despite a 26% drop in Bitcoin-related revenue attributed to shifts in cryptocurrency trading patterns and lower Cash App transaction fees, Block delivered Q1 results that exceeded market expectations.
The payments company founded by Jack Dorsey saw its stock climb 7.9% during extended trading hours following first-quarter results that exceeded Wall Street projections, even as the firm recorded its initial loss in a three-year period.
The first-quarter performance from Block delivered 85 cents in earnings per share, outperforming the 68 cents per share anticipated by Zacks consensus forecasts. The market reaction was favorable, pushing Block's stock price to $75.70 during after-hours sessions, according to Google Finance information.
"This quarterly report represents an earnings surprise of +25.68%," stated Zacks Equity Research in a Thursday release. "Over the last four quarters, the company has surpassed consensus EPS estimates two times."
Dorsey has made extending Bitcoin's functionality within the payments sector a central priority, having previously maintained that achieving widespread adoption in payments is essential to realizing Satoshi Nakamoto's foundational concept of Bitcoin as a peer-to-peer electronic cash system. Toward the end of April, Block disclosed that more than 800,000 merchants throughout the United States have activated Bitcoin payment options for routine transactions.
Block reports first quarterly loss in three years
The better-than-expected earnings performance occurred even as Block disclosed its initial quarterly deficit since 2023, influenced by a 23.8% decline in Bitcoin's value during the three-month timeframe.
The first-quarter net deficit reached $309 million, incorporating a $172.8 million bitcoin remeasurement loss related to the 8,883 Bitcoin held in its portfolio as of March 31.
Revenue generated from Bitcoin through Cash App and additional Block platforms decreased to $1.8 billion compared to $2.33 billion during the corresponding period one year prior.
Block explained the decline as resulting from "Bitcoin trading dynamics" and a "strategic decision to reduce the fee" applied to specific Bitcoin transactions conducted through Cash App.
Block's gross profit rises 27% in Q1
The company's first-quarter gross profit — calculated as net sales less cost of goods sold — totaled $2.9 billion, representing a 27% increase compared to the previous year's equivalent quarter.
Bitcoin-related payment activity within Cash App generated $63 million toward Block's overall gross profit, whereas Square did not produce any meaningful impact on Block's Bitcoin-focused operations.
Sean Emory, founder and chief investment officer at Avory & Co., noted "Block had a strong quarter," having "beat and raised" its guidance.
The reporting period also encompassed a significant organizational restructuring implemented in late February, during which Dorsey revealed plans to eliminate approximately 4,000 positions, accounting for roughly 40% of the company's total employee count, as part of an initiative to increase reliance on artificial intelligence technology in pursuit of enhanced operational efficiency. Block's operating expenses increased 57.2% on a year-over-year basis to $3.08 billion during the first quarter.
Block expands Bitcoin offerings
Toward the conclusion of April, Block introduced a proof-of-reserves system for its corporate Bitcoin holdings and enabled users to verify Bitcoin balances maintained on Cash App and Square as part of an effort to enhance transparency with its clientele.
Within the same product announcement, Block revealed a Bitkey hardware wallet equipped with a touchscreen interface for transaction verification and introduced a new Cash App capability enabling select users to automatically convert incoming payments into Bitcoin.
The company additionally began providing 5% Bitcoin cash back rewards for Square merchants and increased customer withdrawal thresholds fivefold to $10,000 daily and $25,000 weekly, furthering Dorsey's ongoing efforts to expand Bitcoin's integration in routine payment transactions.