Stock Price Surges Despite Bitcoin Crash…What's Block's Secret to Reversal?

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Jack Dorsey's Block Inc. announced stronger-than-expected earnings despite the shock of a sharp drop in Bitcoin prices, causing its stock to surge nearly 8% in after-hours trading.

According to investment media FXStreet on May 8 (local time), Block's first-quarter earnings per share (EPS) for this year recorded $0.85, significantly exceeding market expectations of $0.68. Immediately after the earnings announcement, investor buying surged, pushing Block's stock price up 7.9% to $75.70 in after-hours trading.

The market assessed these results as an 'earnings surprise.' However, Block also recorded a quarterly net loss for the first time since 2023. The first-quarter net loss was $309 million, which included a revaluation loss of $172.8 million on 8,883 BTC of Bitcoin held. During the same period, Bitcoin's price fell by approximately 23.8%.

Bitcoin-related revenue also decreased. Bitcoin revenue generated from Cash App and other Block products fell from $2.33 billion in the same period last year to $1.8 billion this year. Block explained that changes in the Bitcoin trading environment, along with a strategy to reduce some transaction fees on Cash App, had an impact.

On the other hand, profitability metrics improved. Block's first-quarter gross profit was $2.9 billion, an increase of 27% year-over-year. Bitcoin payments within Cash App contributed $63 million to gross profit, and the company stated that Square had no significant impact on the Bitcoin business. It also added that over 800,000 merchants in the U.S. have been set up to accept Bitcoin for everyday payments.

Block is also accelerating the expansion of its Bitcoin business recently. In April, it introduced Proof-of-Reserves to enhance customer asset transparency and unveiled 'Bitkey,' a touchscreen-based hardware wallet. Cash App added a feature allowing some users to automatically convert payment amounts into Bitcoin, and Square merchants began offering a 5% Bitcoin cashback reward. Meanwhile, the company is also undergoing a workforce reduction of approximately 4,000 employees to improve operational efficiency.

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