roadblock It reported third-quarter revenue on Thursday that fell behind Wall Street expectations. The stock initially sold off after hours but erased most of its losses as investors focused more on profitability metrics.
Here's how the company did, compared to consensus analyst estimates from LSEG.
Earnings per share: 88 cents adjusted vs. 87 cents expected Revenue: $5.98 billion vs. $6.24 billion expected
Amrita Ahuja, the bloc's chief financial officer, told CNBC that analysts are focusing more on gross profit than revenue and pointed to the company's earnings growth and outperformance compared to expectations.
Block, formerly known as Square, generated total profits of $2.25 billion, up 19% from last year. The company reported net income of $283.7 million, or 45 cents per share, after a loss of $88.7 million, or 15 cents per share, the previous year.
The Cash App business, the company's popular mobile payment platform that contributes significantly to overall profitability, posted total earnings of $1.31 billion, an increase of 21% year-over-year. Block, run by Twitter co-founder Jack Dorsey, said monthly active users of its Cash App Card increased 11% from a year earlier to more than 24 million.
The total volume of payments amounted to $62.4 billion, which was less than analysts' estimates of $64.3 billion. However, the company has improved its cost structure. Block said fourth-quarter gross profit will increase 14% to $2.31 billion.
Going into earnings, analysts focused on the buy now, pay later unit of the company. Block acquired Australian Afterpay company BNPL for $29 billion in 2021.
CEO Dorsey dedicated his quarterly letter to shareholders to explain the company's lending products, including Square Loans, Afterpay Buy Now Pay Later and Cash App Borrow. He said the company is looking to turn Cash App Cards into a better alternative to credit cards when it launches Afterpay on Cash App Card.
The company's lending products use artificial intelligence to enable “smarter, faster” decision-making and to help Block “manage risk and be flexible in how it underwrites” consumers and small businesses, Ahuja told CNBC.
This helped the company maintain low loss rates across each of the different products, she said. These rates are about 1% on buy now, pay later, 3% on Cash App borrowing, and 4% on Square loans.
“Lending is the primary driver of monetization for Cash App users going forward,” Kevin Kennedy, an analyst at global research firm Third Bridge, said in an email.
Outside of financial services, Kennedy said Cash App could help Block develop an advertising business and charge merchants for promotional rates or brand positioning.
As part of its cost-cutting measures, the company said in a shareholder letter that it will reduce its investment in Tidal, the music streaming service founded by Jay-Z, and fully divest TBD, the Bitcoin-focused arm of Block. . The company went through layoffs earlier this year.
Dorsey said on the earnings call that when it comes to bitcoin, the company is focused on “making it more accessible,” which it's doing with Cash App. In addition, it carries a ban Bitcoin on its balance sheet. The company said it had 8,300 bitcoins at the end of the quarter, which is currently worth about $630 million.
— CNBC's Robert Home contributed to this report.
