Block, the fintech company led by Jack Dorsey, generated $1.97 billion in Bitcoin revenue during the third quarter, a figure that underscores the digital asset's continued importance to its business. Despite this substantial contribution, the company's overall financial results fell short of market expectations, leading to a significant drop in its share price during after-hours trading.
The company reported total revenues of $6.11 billion and an adjusted earnings per share of $0.54 for the quarter ending September 30. These figures were below analysts' forecasts, which had projected revenues of $6.34 billion and earnings of $0.63 per share. The market reacted swiftly to the news, with company shares declining more than 11% in late trading.
Key Takeaways
- Block's Bitcoin revenue reached $1.97 billion in the third quarter, making it the company's second-largest revenue stream.
- Total revenue of $6.11 billion and adjusted EPS of $0.54 missed analyst expectations.
- Gross profit grew 18% year-over-year to $2.66 billion, driven by strong performance in Cash App.
- The company's stock price fell significantly in after-hours trading following the earnings announcement.
- Block continues to expand its Bitcoin services and increase its holdings of the cryptocurrency, signaling a long-term commitment.
A Mixed Financial Picture
While Block missed top-line revenue and earnings forecasts, the company demonstrated notable strength in other key areas. Gross profit climbed to $2.66 billion, an 18% increase compared to the same period last year. This growth was largely propelled by its consumer-focused Cash App, which saw its gross profit jump by 24%.
The company's merchant services division, Square, also contributed with a 9% increase in gross profit. Net income showed significant improvement, rising 64% to $461.5 million for the quarter. However, other performance indicators like adjusted operating income and EBITDA came in slightly below consensus estimates.
For the upcoming fourth quarter, Block has projected a gross profit of approximately $2.75 billion, which would represent a 19% annual growth rate if achieved.
Q3 Financial Highlights
- Total Revenue: $6.11 billion
- Bitcoin Revenue: $1.97 billion
- Gross Profit: $2.66 billion (+18% YoY)
- Net Income: $461.5 million (+64%)
- Adjusted EPS: $0.54
Bitcoin's Central Role in Block's Strategy
Bitcoin-related services remain a cornerstone of Block's business model. The $1.97 billion generated from Bitcoin sales accounted for nearly a third of the company's total revenue in the third quarter. While this figure is down from $2.4 billion in the previous year, it highlights the sustained consumer demand for the digital asset through Cash App.
The costs associated with facilitating these transactions were also substantial, totaling $1.89 billion. This leaves a relatively thin margin on direct Bitcoin sales, but the service is a critical component for user acquisition and engagement within the Cash App ecosystem.
Beyond facilitating sales, Block is deepening its own investment in Bitcoin. The company increased its holdings to 8,780 BTC by the end of September, valued at over $1 billion. Due to accounting rules, the company had to report a negative remeasurement of $59 million on these holdings for the quarter, reflecting price fluctuations.
Expanding the Crypto Ecosystem
Block's commitment to Bitcoin extends beyond its balance sheet. The company is actively building out infrastructure to promote wider adoption. In October, it launched new payment tools and a dedicated merchant wallet designed to help sellers accept Bitcoin payments directly from customers.
This initiative aligns with founder Jack Dorsey's long-stated vision for Bitcoin as a native currency for the internet.
"If he were not working on Twitter or Block, he would be dedicating his career entirely to Bitcoin development," Dorsey has previously remarked, emphasizing his belief in its potential as a medium of exchange.
Regulatory and Political Landscape
Block's expansion into crypto has not been without challenges. Earlier this year, the company paid $40 million to settle allegations from the New York Department of Financial Services regarding compliance deficiencies in its crypto operations. Meanwhile, Dorsey's advocacy is influencing policy discussions in Washington. U.S. Senator Cynthia Lummis is reportedly drafting legislation to exempt small crypto transactions from capital gains taxes, a move that could make using Bitcoin for everyday purchases more practical.
Market Reaction and Long-Term Outlook
The immediate market reaction to the earnings report was negative, with Block's shares falling from a closing price of $70.94 to below $65 in after-hours trading. The miss on key revenue and profit metrics appeared to outweigh the positive growth in gross profit and net income for many investors.
Despite the short-term volatility, some analysts view Block's deep integration with Bitcoin as a strategic long-term advantage. As institutional and retail interest in digital assets continues to grow globally, Block is positioned as one of the most prominent publicly traded companies with significant exposure to the crypto economy.
The company's inclusion in the S&P 500 earlier this year was a major milestone, solidifying its status as a key player in both the traditional fintech and emerging digital asset sectors. The success of its strategy will likely depend on its ability to navigate regulatory hurdles and successfully turn its vision for Bitcoin as a daily-use currency into a reality for its millions of users.
