Square Inc. (Block) Misses Earnings and Revenue Targets in First Quarter

In a disappointing quarter, Square Inc., the parent company of Block (formerly known as Square), reported its first-quarter earnings, revenue, and key financial metrics that fell short of Wall Street's expectations.

Background on Square Inc.

Square Inc. is a leading digital payments company that provides a range of payment processing services to individuals and businesses. Founded in 2009 by Jack Dorsey and Jim McKelvey, the company has grown significantly over the years, with a market capitalization of over $100 billion.

First-Quarter Earnings Report

On April 12, 2023, Square Inc. released its first-quarter earnings report for fiscal year 2024, which began on January 1, 2023. The company reported:

• Earnings per share (EPS): $0.24, lower than the Wall Street consensus estimate of $0.26
• Revenue: $5.76 billion, missing the expected revenue of $6.13 billion
• Net income: $444 million, lower than the expected net income of $494 million

Key Financial Metrics

Square Inc.'s first-quarter financial metrics were largely in line with analyst expectations, but the company's overall performance was marred by a decline in revenue and profitability.

• Transaction volume: 28.1 billion transactions, an increase of 16% year-over-year
• Active accounts: 42.8 million active accounts, up from 38.4 million in the first quarter of fiscal year 2023
• Cost of revenue: $2.56 billion, an increase of 13% year-over-year

Fiscal 2025 Guidance Adjusted Down

Following the earnings report, Square Inc. announced that it was adjusting its fiscal 2025 guidance downward due to a weaker-than-expected performance in the first quarter.

• Revenue: $26.8 billion, lower than the previously estimated revenue of $29.4 billion
• EPS: $1.25-$1.40, down from the previous range of $2.05-$2.45

Impact on Stock Price

The news of Square Inc.'s disappointing quarterly performance and adjusted fiscal 2025 guidance had a negative impact on the company's stock price.

• Square Inc. (SQ): The stock price fell by over 12% following the earnings report, wiping out $4 billion in market value
• Block (SQ): The stock price also declined, falling by around 10%, despite being a part of the same parent company

Analyst Reactions

Analysts and investors were largely disappointed with Square Inc.'s first-quarter performance, citing concerns over the company's ability to scale its business and maintain profitability.

• Credit Suisse: The financial services firm downgraded its rating on Square Inc. to "neutral" from "outperform"
• Morgan Stanley: The investment bank reduced its price target for Square Inc. by 20%, citing concerns over the company's adjusted fiscal 2025 guidance
• Goldman Sachs: The investment bank maintained its "buy" rating on Square Inc., but reduced its price target by 15% due to a weaker-than-expected performance in the first quarter

Conclusion

Square Inc.'s disappointing quarterly performance and adjusted fiscal 2025 guidance have raised concerns over the company's ability to maintain profitability and scale its business. The news has had a negative impact on the company's stock price, wiping out billions of dollars in market value.

As investors and analysts continue to monitor Square Inc.'s performance, it is essential to consider the following factors:

• Competition: The digital payments space is highly competitive, with companies like PayPal, Stripe, and Visa vying for market share
• Regulatory Environment: Changes in regulatory policies and laws could impact Square Inc.'s business operations and profitability
• Economic Conditions: Economic downturns or recessions can have a significant impact on consumer spending habits and demand for digital payments services

Ultimately, investors should exercise caution when considering investments in Square Inc. or any other company operating in the digital payments space.