Block's Bitcoin Bet: 10% Profit to Fuel $573M Investment Surge

Key Takeaway

• Block Inc. plans to invest 10% of its Bitcoin product profits back into Bitcoin, reinforcing its strong belief in the cryptocurrency's future.
• The company's $220 million Bitcoin investment has surged by 160% to $573 million, showcasing significant asset growth.
• Despite a challenging year with shares down 9%, Block raised its full-year profit outlook and beat analyst earnings estimates.

Block's Stellar Financial Performance

Block Inc., previously known as Square, has reported a remarkable first-quarter performance that has exceeded analysts' expectations, leading to a significant 10% increase in its stock value in extended trading. The company announced adjusted earnings per share of 85 cents, surpassing the forecasted 72 cents, with revenue reaching $5.97 billion against the expected $5.82 billion. This financial achievement is underscored by a 22% year-over-year increase in gross profit, totaling $2.09 billion, and a net income of $472 million, which is more than four times the net income from the same period a year earlier at $98.3 million. Such figures not only highlight Block's robust financial health but also its operational efficiency in a competitive digital payments landscape.

Bitcoin Investment Strategy Pays Off

Under the leadership of CEO Jack Dorsey, Block has taken a bold stance on Bitcoin, dedicating 10% of its gross profit from Bitcoin products each month to further investments in the cryptocurrency. This strategic focus is rooted in Dorsey's belief in Bitcoin as the potential native currency of the internet, emphasizing the need for an open money protocol not controlled by any single entity. The company's initial $220 million investment in Bitcoin has seen a 160% growth to $573 million by the end of the first quarter. This significant return on investment demonstrates the potential of Bitcoin to contribute to Block's mission of serving more people globally at a faster rate, despite less than 3% of company resources being dedicated to Bitcoin-related projects.

Navigating Challenges: Cash App Growth and Federal Probes

Cash App, Block's flagship mobile payment platform, continues to be a key driver of profitability, with a 25% year-over-year increase in gross profit reaching $1.26 billion. The platform's monthly active users have also seen a substantial increase, with 24 million active users in March. However, Block faces challenges, including a federal probe into its compliance practices. This investigation, focusing on the company's adherence to know-your-customer and anti-money laundering regulations, could potentially impact future operations. Despite these concerns, analysts from Macquarie maintain a neutral stance on Block, suggesting that the probe may result in fines or the need for more robust oversight rather than structural limitations on the company's business activities.

Management Quotes

• Jack Dorsey, CEO of Block Inc.:

  "Block will invest 10% of gross profit from Bitcoin products each month into buying Bitcoin for investment... We believe the world needs an open protocol for money, one that’s not owned or controlled by any single entity. We believe Bitcoin is the best and only candidate to be that protocol, and to ultimately become the native currency of the internet."