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Earnings Results: Square stock rockets higher after earnings outlook calls for improving growth as 2022 goes on

Block Inc. exceeded expectations with its latest earnings, revenue, and gross-profit numbers Thursday, but shares of the company formerly known as Square headed lower in after-hours trading.

The company posted a net loss of $77 million, or 17 cents a share, whereas it generated net income of $294 million, or 59 cents a share, in the year-prior quarter. After adjusting for stock-based compensation and other expenses, Block
SQ,
+7.07%

earned 27 cents a share, down from 32 cents a share a year earlier but above the FactSet consensus, which was for 23 cents a share.

Block generated overall revenue of $4.08 billion, up from $3.16 billion a year ago and above the $4.04 billion that analysts tracked by FactSet had been anticipating. The company saw $1.31 billion in transaction-based revenue, $772 million in subscription and services revenue, $36 million in hardware revenue and $1.96 billion in bitcoin revenue.

Square changed its corporate name to Block in December, with the view that the new name better reflects the company’s expanding domain, which includes its original merchant business, the Cash App mobile wallet, the Tidal streaming service, and various crypto-related efforts. The merchant business is retaining the Square brand name.

The company’s Square seller business generated a gross profit of $657 million, while its Cash App business saw gross profit of $518 million. Analysts tracked by FactSet were anticipating $631 million in seller gross profit and $503 million in Cash App gross profit.

“Despite a roll off in government disbursements in the fourth quarter, we saw strength in recurring paycheck deposits, which we view as a key barometer of customers using Cash App for their primary banking needs,” the company said in its shareholder letter.

Block’s overall gross profit rose to $1.18 billion from $804 million a year earlier, while analysts had been modeling $1.16 billion. Analysts view gross profit as a key metric for Square as it accounts for the fact that some elements of Block’s business, such as the bitcoin-trading feature in the Cash App mobile wallet, are fairly low-margin.

Bitcoin
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+1.96%

gross profit was $46 million in the latest quarter, just 2% of bitcoin revenue.

Block generated gross payment volume of $46.3 billion in the fourth quarter, up from $32 billion in the year-prior quarter. The latest total matched the FactSet consensus.

Shares of Block have declined 56% over the past three months as the S&P 500
SPX,
+1.50%

has lost about 9%.

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