Block sees higher profits despite lagging Bitcoin sales
Online payments giant Block reported on Thursday strong growth in revenue and gross profit in the fourth quarter, as the main stalwarts of its business, digital wallet CashApp and business payments platform Square, showed large gains.
The company posted $1.66 billion in gross profit in the fourth quarter of 2022, an almost 40% increase from nearly $1.2 billion in the fourth quarter of 2021. Revenue was $4.65 billion, a jump from $4.1 billion in the same quarter of 2021. CashApp and Square drove most of those gains, as CashApp posted a staggering 64% jump in year-over-year gross profit, and Square had 22%.
In after-hours trading, share prices rose approximately 8% percent from $74 to $80.
The company reported quarterly earnings per share of 22 cents, compared with an estimate of 30 cents per share by analysts polled by FactSet. Block, however, beat predictions on revenue and gross profit.
“Looking ahead to 2023 and beyond, we are focused on balancing growth and efficiency and will prioritize speed, agility, and accountability,” Block CEO Jack Dorsey and CFO Amrita Ahuja wrote in a letter to shareholders.
The outlook, however, for the company’s dive into Bitcoin was more tepid. Block invested $220 million in Bitcoin in 2020 and 2021, but the company’s Bitcoin holdings were valued at just $133 million at the end of 2022.
Its Bitcoin trading business on CashApp also declined. Total fourth-quarter revenue from Bitcoin sales on CashApp was $1.83 billion, down from $1.96 billion in the same quarter in 2021, and its year-over-year gross profits from the cryptocurrency decreased from approximately $46 million to $35 million, a mere fraction of Block’s total gross profit.
In 2018, Dorsey, a notable Bitcoin evangelist, announced that CashApp users would be able to buy and sell Bitcoin through the digital wallet. And more than two years later, the company, formerly known as Square, made significant investments in the cryptocurrency. To signify his company’s devotion to crypto, Dorsey then announced that the payments titan would be changing its name to Block. Since then, he has continued to double down on Bitcoin.
Dorsey announced the creation of TBD, a Block subsidiary that soon released a white paper detailing plans for the construction of a decentralized Bitcoin trading exchange. After the fall of FTX, Block also announced that it’s developing a new wallet to allow its customers to hold Bitcoin themselves, rather than having tokens handled by third parties. And the company has even recently invested in a Bitcoin mining firm that says it is trying to bring cheap energy to places like Kenya and Malawi.
Learn how to navigate and strengthen trust in your business with The Trust Factor, a weekly newsletter examining what leaders need to succeed. Sign up here.
