Dorsey-led Block's profit disappoints as bitcoin boost fades

BLOCK, the fintech firm led by Twitter co-founder Jack Dorsey, missed market estimates for first-quarter profit on Thursday (May 5) as demand for bitcoin weakened due to a decline in cryptocurrency prices.

The company’s bitcoin revenue halved in the quarter to US$1.73 billion, hit by a drop in interest from retail traders as prices of the cryptocurrency retreated after a sharp rally last year that was fuelled by its rising acceptance in the mainstream.

Bitcoin - the largest cryptocurrency - has dropped 21 per cent so far this year because of the risk-off mood sparked by the Russia-Ukraine conflict and a more hawkish outlook for Federal Reserve policy tightening.

During the quarter, Block closed its US$29 billion purchase of Australian buy now, pay later pioneer Afterpay, creating a transactions giant that competes with banks and tech firms in the financial sector’s fastest-growing business.

Afterpay contributed US$92 million of gross profit in the period, which was recorded under the Square and Cash app units. That helped Cash App - a service that lets individuals send payments including in bitcoin - post a 26 per cent jump in gross profit.

“We’ve been focused on bringing the demand generation capabilities of Afterpay to Cash App and are in the early days of building out a broader commerce platform,” chief financial officer Amrita Ahuja said.

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She added that Afterpay’s gross merchandise value - the value of all goods sold - was expected to rise 15 per cent in April.

Shares of Block, formerly known as Square, were 10 per cent higher in extended trading.

In the 3 months ended Mar 31, Block’s revenue fell 22 per cent to US$3.96 billion. The company earned an adjusted profit of 18 US cents per share, falling short of analysts’ estimates of 21 cents, according to IBES data from Refinitiv. REUTERS