Block’s Shares Surge Following Bullish Q3 Earnings

Shares of Jack Dorsey’s fintech company, Block (SQ), soared by 12% to $49.19 on Friday after the release of strong third-quarter earnings.

The company’s payment subsidiary, Cash App, saw increased revenue from bitcoin, with a 37% rise compared to the same period last year.

Block’s Q3 Earnings Report

According to the report published on Thursday, Block’s total net revenue increased by 24% year over year to $5.62 billion. Excluding bitcoin revenue, the figure stands at $3.19 billion, a 16% increase from Q3 2022.

Cash App generated bitcoin revenue by selling BTC to customers. Only 2% of that revenue, equivalent to $45 million this quarter, is retained by the company as gross profit.

Block’s earnings per share came in at $0.55, surpassing expectations of $0.47. Gross profit grew by 21% from $1.57 billion to $1.9 billion.

Transaction-based profit accounted for approximately $674 million, while subscription and services-based profit amounted to $1.23 billion, representing a 9% and 25% increase year over year, respectively.

Block’s bitcoin Balance

Block also benefited from the rising value of bitcoin on its balance sheet. As of September 30, bitcoin was trading at compared to $26,967 a year prior.

“The carrying value of our investment in bitcoin, after cumulative impairment charges, was $102 million, while the fair value, based on observable market prices, was $216 million, which was $114 million in excess of our carrying value,” the company’s shareholder letter stated.

Current accounting standards require an “impairment charge” for bitcoin held on corporate balance sheets when its value declines. This charge cannot be written off if the value of bitcoin bounces back.

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A new “fair value” accounting standard for digital assets is expected to be implemented in 2024, valuing bitcoin in corporate treasuries based on observable market prices.

Coinbase, the leading crypto exchange in the United States, also exceeded revenue expectations in the third quarter, generating $674 million in earnings mainly from subscription and services revenue.

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By Team