Block Earnings Preview: Payment Growth and Bitcoin Recovery Drive Performance Improvement

Block, Inc. (NYSE: SQ), the parent company of Square and Cash App, is expected to report its third quarter earnings on November 7, 2024. Analysts anticipate an improvement in the company's performance, driven by growth in payment volume and a recovery in the price of Bitcoin. This article explores the key factors contributing to Block's expected earnings growth and provides insights into the company's strategic initiatives.



Payment Growth and Bitcoin Recovery

Block's earnings performance is closely tied to the growth in payment volume and the price of Bitcoin. In the upcoming quarter, the company expects an improvement in payment growth, with Square's Gross Payment Volume (GPV) growth modestly increasing compared to the third quarter. Additionally, Block anticipates strong momentum on gross profit and improved attach rates on paycheck deposits for Cash App. These factors are expected to contribute to Block's earnings growth in the upcoming quarter.



Strategic Initiatives

Block's strategy to expand its ecosystem of financial products and services, including Cash App and Square, has significantly contributed to its overall earnings growth. The company has seen consistent increases in gross profit, driven by both Square and Cash App, and has delivered a significant increase in profitability on a year-over-year basis. Block's expansion into new financial services and products, such as Cash App Borrow, has driven growth in both its Cash App and Square segments.



Challenges and Outlook

While Block expects an improvement in its earnings performance, there are a few discrete items that impact gross profit growth by about 3 points. In Cash App, the expansion of Cash App Borrow into new customer segments has been shifted out, and in Square, there has been a delay in a one-time transaction cost-benefit from a partner. These items are expected to land in 2025, which may impact the earnings performance in the upcoming quarter.

Despite these challenges, Block remains well-positioned for long-term growth. The company's focus on creating ecosystems for distinct customer audiences and its investment in new products like Cash App Borrow are positive signs for its future prospects. Additionally, Block's strong balance sheet and cash flow generation capabilities provide a solid foundation for continued investment in growth initiatives.



In conclusion, Block's expected improvement in payment growth and Bitcoin price recovery should translate into better earnings performance in the upcoming quarter. The company's strategic initiatives, including the expansion of its ecosystem of financial products and services, have contributed to its overall earnings growth. While there are some challenges to overcome, Block remains well-positioned for long-term growth. Investors should closely monitor Block's earnings report and the company's strategic initiatives to assess its future prospects.