Block sinks 10% after weak third quarter results miss Wall Street estimates

Shares of Block fell by 10% on Friday after the company reported third-quarter earnings that did not meet Wall Street's expectations, highlighting a slowdown in profit growth for its Square service. The earnings report revealed a modest revenue increase of 2% compared to the previous year. Founded by Jack Dorsey, Block's stock has now dropped 24% since the beginning of the year. Although Square's gross payment volume showed a year-over-year rise of 12%, the gross profit growth for the point-of-sale service lagged behind, reaching only 9%, a decrease from the previous quarter's growth of 11%. The company cited a change in processing partners and a decline in lower-margin hardware sales as factors contributing to the slower growth. Chief Financial Officer Amrita Ahuja expressed optimism during the earnings call, stating, "Our product and go-to-market strategies are working as we continued to gain profitable market share in our target verticals like food and beverage, with larger sellers, and outside the U.S." In contrast, the performance of Cash App was notably stronger, with gross profit growth rising to $1.62 billion, a 24% increase year-on-year, supported by 58 million monthly transacting active users. This success was driven by features like Cash App Borrow, Cash App Card, and Buy Now Pay Later offerings. Analysts from Morgan Stanley expressed cautious optimism, noting they were "encouraged by the pace of credit expansion at Cash App" and were keen to see if this growth translates into better inflows per customer and an increase in direct deposit accounts. Ahuja pointed out that gross profit remains a highlight for Block, reporting a total of $2.66 billion, which marks an 18% increase from the previous year and exceeded FactSet’s estimate of $2.60 billion for the quarter. Furthermore, the company has raised its full-year guidance for gross profit, now expecting to reach $10.2 billion for 2025, up from earlier projections. Block also reported a net income of $461.54 million, or 74 cents per share, a significant increase from the $283.75 million, or 45 cents per share, recorded a year prior.