Block (ASX: SQ2) investors can breathe a sigh of relief as a quarterly earnings beat rallied the stock 40% higher as the market opened.
Looming interest rate hikes and a broad-based pivot away from technology stocks has dragged Block shares almost -70% lower since its offer to takeover Afterpay on 2 August 2021.
Revenue of US$4.08bn, up 29%
Gross profit of US$1.18bn, up 47%
Net loss of -US$77m
Cash and cash equivalents of US$4.44bn
Revenues came in slightly ahead of the US$4.04bn forecasts from analysts tracked by FactSet.
Other financial metrics including gross profits, net loss and earnings per share all came in slightly above analyst expectations.
For the uninitiated, Block’s business primarily consists of Square and the Cash App.
The Cash App is a mobile banking app that enables users to send and receive money, as well as buy/sell stocks and cryptocurrencies.
From an earnings perspective, Square and the Cash App contributed a respective US$658m (56%) and US$518m (44%) in December quarter gross profits.
In January and February, Square gross payment volumes were up 35% year-on-year. The company said it experienced a slowdown in volumes in January, likely due to the effects of omicron, before growth recovered in February.
"Global expansion is one of Square’s key strategic priorities in 2022 given the significant market opportunity," the company said in its shareholder letter.
Block said that it expects the Cash App gross profit to grow year-over-year, but no specific update was provided.
"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."
Afterpay’s performance will be included in the company’s March quarter results.
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