Block’s Revenue Grew 26%, Driven by Cash App

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Shares of fintech Block were rising in after-hours trading Thursday after the payments company beat first-quarter revenue expectations, driven by its Cash App mobile payments platform.

Total net revenue for the first quarter was $4.99 billion, up 26% year over year. Gross profit increased 32% to $1.71 billion, or 27% year over year on a combined company basis. 

Block

(ticker: SQ) also reported an operating loss of $6 million, adjusted operating income of $51 million, and a net loss for the quarter of $17 million, or 40 cents per share. 

Analysts surveyed by FactSet expected the company led by co-founder and former Twitter CEO Jack Dorsey to report earnings of 35 cents a share on revenue of $4.6 billion.

Block said its mobile payments platform Cash App’s gross profit grew 49% from last year, to $931 million. Its point-of-sale system’s gross profit increased 16% to $770 million year over year. 

The company said Cash App’s monthly card actives increased 34% to 20 million in March, and that their average spend grew as well.

For full-year 2023, Block raised its adjusted earnings before interest, taxes, depreciation, and amortization to $1.36 billion, up from the previous $1.3 billion

The results seem enough to please investors in the company—which includes mobile payments platform Cash App, point-of-sale system Square, and “buy now, play later” service Afterpay. After closing up 1.9% on Thursday, shares of Block were 2% higher in the after-hours session.

Investors have seen Block’s shares beaten up this year after a critical report from a short seller. The stock is down 3.8% in 2023, compared with a 5.8% gain for the

S&P 500
index and a 14% jump in the tech-heavy

Nasdaq Composite.
 

Much of the decline in Block stock has come since March 23—before which the stock was up 16% year to date—when Hindenburg Research disclosed a short position and published a critical report about the business. A short position is a trade that effectively bets against a stock, and Hindenburg alleged that Block had inflated user metrics and didn’t rein in illicit activity by customers on its Cash App platform.

Block pushed back against the allegations, first by saying it would explore legal action against Hindenburg, and then by releasing a detailed rebuttal. In a statement, the company laid out verified user numbers and reiterated its strict approach to risk and compliance.

Investors shouldn’t expect headwinds from Hindenburg’s allegations, which split Wall Street, leading to a number of downgrades from analysts, to let up just yet. While the core metrics from Block’s earnings will be key when the company releases results, expect questions—and potentially new revelations—as analysts are almost certain to take advantage of the earnings conference call to grill management.

Block also faces growing competition from PayPal (PYPL) and Apple‘s (AAPL)

Apple

Pay program. In addition, Bank of America (BAC), JPMorgan Chase (JPM), and five of the other big banks behind payments network Zelle are planning to launch a digital wallet this year. If the digital wallet is integrated into services already offered to existing bank customers, they could opt to use Zelle’s product over Block or

PayPal

simply by clicking or tapping the option when making online purchases.

Write to Jack Denton at jack.denton@barrons.com and Janet H. Cho at janet.cho@dowjones.com