Afterpay parent Block reports another sharp loss as bitcoin earnings tumble

Afterpay parent Block (ASX: SQ2) has returned to loss making territory as the fallout of cryptocurrencies has taken a major toll on Group revenues. The company’s shares opened -5.8% lower as the market opened. 

Quarterly gross profit rose 29% year-on-year to US$1.47bn, in-line with Wall Street expectations of US$1.46bn. Adjusted earnings was 18 cents per share ahead of estimates of 16 cents.

Still, net revenue fell -6% year-on-year to US$4.4bn, driven by a decrease in bitcoin-related revenues. The group posted a net loss of -US$208m for the June quarter, a complete turnaround from the US$204m profit a year ago.

Perhaps of some concern was the 65% spike in operating expenses to US$1.30bn, reflected across product development, sales, marketing and general expenses.

For the uninitiated, Block’s key businesses include:

• Cash App, a mobile payment service 

• Square, the EFTPOS terminal and transaction services

• Afterpay

Solid Square

Square revenues rose 32% year-on-year to US$1.73bn or almost 40% of group revenues.

The growth was most attributed to transaction-based revenue trending higher, up 22% to US$1.36bn.

Subscription and service-based revenue is beginning to make a noticeable contribution to Square, jumping 110% to US$318m. This segment includes loans, banking and software services.

For the month of July, Square gross payment volume (GPV) is expected to be up 18% year-on-year.

Crypto fallout weighs on Cash App

Cash App revenues fell -21% year-on-year to US$2.62bn, primarily due to a fall in Bitcoin transactions.

Block said this reflected a "decline in consumer demand and the price of bitcoin, related in part to broader uncertainty around crypto assets, which more than offset the benefit of volatility in the price of bitcoin during the quarter."

"In future quarters, bitcoin revenue and gross profit may fluctuate as a result of changes in customer demand or the market price of bitcoin," the company warned.

Cryptocurrencies aside, inflows per transacting account was US$1,048 in the June quarter, relatively stable on a quarter-on-quarter basis. Though, inflows was down -11% year-on-year, cycling through the government subsidies from 2021.

What about Afterpay?

Block allocates 50% of Afterpay earnings to each of the Square and Cash App segments.

Afterpay contributed US$208m in revenue and US$150m of gross profit for the quarter.

Block share price chart