Block share price jumps 7% on Q4 profit beat

This payments giant had a stronger than expected fourth-quarter, much to the delight of shareholders…

| More on:
Happy man wearing a blue shirt and glasses holding a card and using buy now pay later services to purchase a product on his office computer

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Block has released its fourth-quarter update
  • The payments giant delivered strong profit growth
  • Its growth was stronger than expected and its shares are shooting higher

The Block Inc (ASX: SQ2) share price is shooting higher on Friday.

In morning trade, the payments company's shares are up 7% to $116.73.

Investors have been buying the Afterpay owner's shares following the release of its fourth quarter update.

Block share price jumps on strong quarter

  • Net revenue up 14% to US$4.65 billion
  • Net revenue (excluding crypto) up 33% to US$2.82 billion
  • Gross profit up 40% to US$1.66 billion
  • Adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) up 53% to US$281 million
  • Net loss widened to US$114 million
  • Adjusted net earnings per share of 22 US cents

What happened during the quarter?

For the three months ended 31 December, Block reported a 40% increase in gross profit to US$1.66 billion. This was driven by a 22% increase in Square gross profit and a 64% jump in cash app gross profit.

Block also revealed that excluding its buy now pay later (BNPL) platform, gross profit was US$1.46 billion. This appears to indicate that Afterpay contributed US$200 million of gross profit during the quarter.

But the real star of the show was the Cash App business, which delivered gross profit of $848 million, an increase of 64% year over year. This reflects a 16% year over year increase in monthly active users to 51 million, with two out of three transacting each week on average.

How does this compare to expectations?

According to data from Bloomberg, the market was expecting revenue of US$4.57 billion, gross profit of US$1.63 billion, and adjusted earnings per share of 28 US cents.

This means that Block has beaten on the top line and with its gross profit but has fallen short of expectations with its earnings per share.

Outlook

Management revealed that it has started FY 2023 positively.

It estimates that it will deliver Block gross profit growth of 33% and combined company gross profit growth of 25% in January and February based on current trends.

Management believes the latter is more representative of underlying growth trends. That's because the Afterpay business was acquired at the end of January 2022 and the latter numbers assume the acquisition completed on 1 January and contributed $51 million gross profit in the prior corresponding period.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Block. The Motley Fool Australia has positions in and has recommended Block. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Technology Shares

Man sitting in a plane looking through a window and working on a laptop.
Broker Notes

Macquarie tips 28% upside for this ASX All Ords tech stock

Let's see what the broker is saying about this growth stock.

Read more »

happy teenager using iPhone
Share Gainers

Up 96% since April, should I still buy Life360 shares today?

A leading expert offers his verdict on the growth outlook for the surging Life360 share price.

Read more »

A female soldier flies a drone using hand-held controls.
Technology Shares

DroneShield shares charge higher on European expansion plans

This high-flying stock is surging again on Tuesday. But why?

Read more »

Human head and artificial intelligence head side by side.
Technology Shares

NextDC share price jumps 8% on big news

Another big announcement has caught the eye of investors this morning.

Read more »

A man sits in contemplation on his sofa looking at his phone as though he has just heard some serious or interesting news.
Technology Shares

Up 60% in two months, is it too late to buy Pro Medicus shares?

Pro Medicus has been delivering solid returns for years. Can the trend continue?

Read more »

Group of people in a gym high five each other surrounded by gym equipment.
Mergers & Acquisitions

This ASX tech stock is hitting a record high on acquisition news

The market is responding positively to this news. Let's dig deeper into it.

Read more »

A man in a suit face palms at the downturn happening with shares today.
Technology Shares

Guess which ASX 300 share is crashing 17% on shock news

Investors are rushing to the exits on Thursday. Let's find out why.

Read more »

Cheerful boyfriend showing mobile phone to girlfriend in dining room. They are spending leisure time together at home and planning their financial future.
Technology Shares

These were the best ASX 200 tech stocks to buy in May

Shareholders of these shares were smiling last month. But why?

Read more »