Block Stock Surges on Rosy Profit Projections for Rest of Year

(Bloomberg) — Block Inc., the digital-payments firm run by Jack Dorsey, surged more than 26% in after-hours trading after an unexpectedly positive outlook for the rest of 2022.

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The company, formerly known as Square, said its Cash App’s gross profit will be stronger in the second half of the year. Fourth-quarter revenue was $4.08 billion, slightly topping the $4.01 billion average estimated by analysts.

Block says that while gross payment volume will be lower than expected in the current quarter, the company will grow its gross profit each quarter for both Cash App, its payments service, and Square’s seller business for the rest of the year. Gross profit for the fourth quarter — a metric that includes fees from Square’s Cash App and Seller businesses — was $1.18 billion, up 47% over the same period a year ago.

Thursday was the company’s first earnings report since changing its name in December, an effort to differentiate its corporate entity from its Square seller product — and a signal of its increased investment in blockchain technologies and Bitcoin. Co-founder and Chief Executive Officer Dorsey is a Bitcoin enthusiast, and San Francisco-based Block has a number of Bitcoin-related initiatives in the works, including a financial-services division focused on the cryptocurrency.

Revenue from Bitcoin purchases in the foruth quarter was $1.96 billion, almost half of Block’s total quarterly sales, though executives say those transactions contribute little to the bottom line. Gross profit generated by Bitcoin sales was just $46 million. Net income, excluding some items, was $140.4 million. Analysts projected $115.1 million.

In January, Dorsey confirmed Block’s plans to develop its own Bitcoin mining system.

It’s also the first financial report since Dorsey resigned as CEO of his other company, Twitter Inc., in November. Dorsey is no longer dividing his time between two companies, for the first time since 2015.

Block also said it completed its $29 billion purchase of buy-now, pay-later company AfterPay at the end of January.

(Includes comments from Block analyst call and shareholder letter)