Block sees higher profits despite lagging Bitcoin sales
Jack Dorsey, co-founder and CEO of Block, speaks at the 2021 Bitcoin Convention in Miami. Marco Bello—AFP/Getty Images
Online payment giant Block reported Thursday strong growth in revenue and gross profit in the fourth quarter, as the main backers of the business, digital wallet CashApp and business payment platform Square, posted big gains.
The company posted $1.66 billion in gross profit in the fourth quarter of 2022, an increase of nearly 40% from nearly $1.2 billion in the fourth quarter of 2021. Revenue was $4.65 billion, a jump from $4.1 billion in the same quarter 2021. CashApp and Square drove most of those gains, as CashApp had a staggering 64% jump in gross profit year-over-year and Square had 16%.
In after-hours trading, share prices rose about 8% percent from $74 to $80.
The company reported quarterly earnings per share of 22 cents, compared with an estimate of 30 cents per share from analysts polled by FactSet. However, the company beat forecasts on revenue and gross profit.
“As we look ahead to 2023 and beyond, we are focused on balancing growth and efficiency and will prioritize speed, agility and accountability,” Block CEO Jack Dorsey and CFO Amrita Ahuja wrote in a letter to shareholders.
However, the outlook for the company’s dive into Bitcoin was more tepid. Block invested $220 million in Bitcoin in 2020 and 2021, but the company’s Bitcoin holdings were valued at just $133 million by the end of 2022.
Bitcoin trading business on CashApp also fell. Total revenue from Bitcoin sales on CashApp in the fourth quarter was $1.83 billion, down from $1.96 billion in the same quarter in 2021, and year-over-year gross profit from the cryptocurrency fell from roughly $46 million to $35 million , only a fraction of Block’s total gross profit.
In 2018, Dorsey, a noted Bitcoin evangelist, announced that CashApp users would be able to buy and sell Bitcoin through the digital wallet. And more than two years later, the company, formerly known as Square, made significant investments in the cryptocurrency. To mark the company’s devotion to crypto, Dorsey announced that the payments titan would change its name to Block. Since then, he has continued to double down on Bitcoin.
Dorsey announced the creation of TBD, a Block subsidiary that soon released a white paper detailing plans for building a decentralized Bitcoin trading exchange. Following the fall of FTX, Block also announced that it is developing a new wallet to allow its customers to hold Bitcoin themselves, instead of having tokens managed by third parties. And the company even recently invested in a Bitcoin mining company that it says is trying to bring cheap energy to places like Kenya and Malawi.
