Block Inc. (SQ), formerly Square, delivered mixed results for Q3 2024, meeting analysts’ expectations on EPS at $0.88 but falling short on revenue, reporting $5.98 billion against an estimated $6.24 billion. Gross profit, however, came in at $2.25 billion, a 19% year-over-year increase, slightly beating expectations. This growth was largely supported by the company’s two main segments, Cash App and Square, which saw year-over-year gross profit gains of 21% and 16%, respectively. Adjusted EBITDA also exceeded estimates, reaching $807 million, up 69% year-over-year, highlighting Block's effective cost management strategies.

Cash App, one of Block’s flagship products, maintained its strong growth momentum, posting $1.31 billion in gross profit, driven by increased user inflows and higher monetization rates. However, transaction-based revenue and hardware revenue were somewhat soft, with GPV rising 7.5% to $59.9 billion, falling short of the expected $64.33 billion. This slower growth in GPV from Square’s merchant transactions, coupled with the underperformance in Bitcoin revenue, contributed to the overall revenue miss for the quarter. CEO Jack Dorsey expressed optimism about Cash App’s performance, citing growth in user engagement and monetization as key drivers.

For Q4, Block issued conservative guidance, forecasting gross profit of $2.31 billion and adjusted EBITDA of $725 million, both below Street expectations of $2.35 billion and $750 million, respectively. Management attributed this outlook to temporary headwinds, including delays in transaction cost benefits from a Square partner and slower-than-expected expansion of Cash App Borrow, which it expects to materialize in 2025. Despite these near-term pressures, Block raised its full-year guidance for adjusted operating income to $1.56 billion, with an adjusted EBITDA target of $3 billion.

Looking forward, Block offered a preliminary 2025 outlook with projected gross profit growth of 15%, suggesting confidence in its ability to capitalize on growth opportunities once current headwinds subside. Analysts noted the company’s plan to focus on enhancing its U.S. GPV in Q4 based on positive trends seen in October, though there is caution about slower-than-expected growth in international GPV. Block also aims to maintain its focus on cost management, aiming for steady margin expansion to support profitability.

Following the earnings announcement, Block’s stock initially fell by around 10% in after-hours trading before paring losses to around 3% in pre-market activity. Investor concerns were primarily centered on the revenue miss, GPV growth slowdown, and the tempered Q4 guidance, which led some to reassess the stock’s valuation amid elevated expectations. However, analysts at Needham maintained a Buy rating and raised their price target from $80 to $90, expressing optimism about Block's long-term growth potential as GPV headwinds ease.

Overall, the Q3 performance reflects both the strengths of Block's core operations and the challenges it faces, particularly in sustaining its growth trajectory amid economic uncertainties. The conservative guidance for Q4 signals a prudent approach, with management focusing on stabilizing its cost structure while positioning itself for a stronger 2025. Investors may see the recent pullback as an opportunity, but those considering a position should weigh the near-term challenges against Block’s potential to capture future growth in digital finance and payments.

In conclusion, while Block's Q3 results were mixed, the company remains well-positioned for long-term growth in digital payments and personal finance. Investors with a long-term horizon may view the recent dip as an entry point, but it will be essential to monitor the execution of Block’s strategic initiatives and the resolution of current headwinds into 2025.