Key Takeaways
- Block shares tumbled Friday after the payments provider posted weaker-than-expected earnings and higher expenses.
- Cash App remains a big source of growth for Block, outpacing Square’s gross profit gains for the third quarter.
Block (XYZ) shares slumped Friday after the fintech company’s quarterly results fell short of Wall Street’s expectations on the top and bottom lines.
The stock was down about 10% in recent trading, leading decliners in the S&P 500. Read Investopedia’s full daily markets coverage here.
Block reported adjusted earnings of 54 cents a share on revenue that rose about 2% year-over-year to $6.11 billion in the third quarter. Both figures came in below analysts’ estimates. The payments provider’s gross profit grew 18% to $2.66 billion. Cash App’s 24% gross profit growth accounted for the majority of those gains, while gross profit at payments unit Square increased a more modest 9%.
Why This Matters to Investors
The big drop in Block’s stock following its results comes as traders punish companies more heavily for missed expectations this earnings season, and offer softer rewards for beating them.
Block raised its full-year guidance, citing strong trends across the business. The company now expects gross profit of $10.24 billion, up from its prior estimate of $10.17 billion. Block also boosted its forecast for full-year adjusted operating income to $2.056 billion from $2.03 billion.
Still, investors focused on its earnings miss and rising expenses, including a nearly $70 million increase in general and administrative costs that the company attributed partly to “an in-person company event.” According to Block, general and administrative expenses would have been roughly flat year-over-year without that event.
With Friday’s plunge, shares of Block have lost about one-quarter of their value since the start of the year.