Block Inc. Lowers Sights as Revenue from Bitcoin Drops

Payments firm Block Inc has said it will slow hiring and lower its 2022 investment target by $250 million after announcing its second quarter financial results.

Block reported a second-quarter loss of $208 million for the three months ending June 30, according to a letter to shareholders. This contrasts with the $204 million in profit for the same period last year. On an adjusted basis, Block reported second-quarter net income of about $110.7 million, compared to $256 million for the same period in 2021. 

Total revenue fell roughly 6% to $4.4 billion for the quarter, slightly exceeding Wall Street’s expectations of $4.3 billion. Not including Bitcoin revenue, total net revenue amounted to $2.62 billion, a year-on-year appreciation of 34%.

The company’s recently acquired buy-now-pay-later unit Afterpay contributed $150 million to gross profit, split among the company’s Square and Cash App segments. While this had helped Cash App post a 29% jump in gross profit, Bitcoin revenue from the product fell 34% to $1.79 billion, with the company taking a $36 million charge on its Bitcoin investments.

The Cash App stood out during the first quarter, seeing a 26% boost that contributed $578 million to gross profit.

Crypto downturn partly to blame

The payment firm’s cryptocurrency holdings are primarily what dragged down its results this past quarter. Although Block’s first-quarter operating earnings exceeded Wall Street’s expectations, a weaker Bitcoin caused a fall in overall revenue.

Bitcoin prices slumped some 36% during the second quarter, as investors lost their appetites for riskier assets due to rising interest rates, the ongoing Ukraine crisis and regulatory hurdles facing cryptocurrencies. 

Consequently, Block’s Bitcoin gross profit, which the company earns from the spread on buying and selling the cryptocurrency, shrank 24% to $41 million.

“While gross profit trends have been healthy through July, we recognize the importance of exercising discipline with our investments as we enter a period of potential uncertainty,” Chief Financial Officer Amrita Ahuja said referring to the plans to slow hiring and investment.