Square’s Q1 Miss and Strategic Shifts: Navigating Uncertainty in Fintech
4min read Square (SQ), now rebranded as block, reported a disappointing Q1 2025, with revenue and earnings falling sharply below expectations. The results triggered a 17% post-earnings stock selloff, highlighting investor skepticism about the company’s ability to navigate macroeconomic headwinds. Yet beneath the surface, Block’s strategic bets on credit products, AI-driven efficiency, and Bitcoin hardware hint at a path to recovery. Here’s what investors need to know.
Revenue and Earnings: A Miss with Macro Underpinnings
Square’s Q1 revenue totaled $5.77 billion, a 3% year-over-year decline and a $440 million shortfall against Wall Street’s $6.21 billion consensus. The adjusted EPS of $0.56 was nearly half the expected $0.98, underscoring the severity of the miss. While gross profit rose 9% to $2.29 billion, it still missed estimates due to weaker-than-anticipated performance in the Cash App segment.
The decline in Cash App’s tax season activity—typically a key revenue driver—proved costly. A shift in consumer behavior during the February–March tax refund period led to lower discretionary spending (travel, media) and weaker Cash App inflows. Gross profit per Monthly Transacting Active User (MTAU) dropped to $81, further pressuring margins.
Operational Metrics: GPV Growth and Cost Discipline
Total Gross Payment Volume (GPV) reached $56.8 billion, below the $58 billion estimate. Square’s GPV grew 7.2% YoY, with constant currency growth at 8.2%, driven by improved banking attach rates and upmarket seller acquisitions. The company’s cost discipline shone through in its 15% YoY rise in adjusted EBITDA to $813 million and a 28% jump in adjusted operating income to $466 million.
However, the April 2025 data brought cautious optimism: GPV grew 9.6% YoY, suggesting stabilization. This uptick aligns with CEO Jack Dorsey’s emphasis on product velocity, including AI tools like “Goose,” which aims to streamline operations and boost seller retention.
Strategic Shifts: Betting on Credit and Bitcoin
Block’s long-term thesis hinges on three pillars:
1. Cash App Borrow: Now available nationwide, the product doubled eligible users and improved unit economics, with loss rates below 3%. Early adoption of Cash App Afterpay—launched in late Q1—points to potential 2026 growth.
2. Square’s Upmarket Push: Field sales teams and partnerships are targeting larger merchants, a strategy yielding April’s 9.6% GPV growth.
3. Bitcoin Hardware: Proto’s mining chips/systems, expected by H2 2025, could generate $3–6 billion in annual revenue, a critical diversification play.
Risks and Valuation: A Mixed Outlook
The near-term outlook is clouded by macroeconomic risks. Block lowered its 2025 gross profit growth guidance to 12%, down from prior targets, with Q2 expected to grow only 9.5%. The company’s valuation also reflects skepticism: a $36.43 billion market cap and a 12.59x P/E ratio suggest investors are pricing in caution.
Yet Block’s liquidity—$3.7 billion in cash and equivalents—and current ratio of 2.33 provide a strong buffer against uncertainty. CFO Amrita Ahuja emphasized maintaining a 19% adjusted operating margin target, underscoring discipline in ROI-driven spending.
Conclusion: A Long-Term Play Amid Short-Term Pain
Square’s Q1 miss and guidance cut underscore the challenges of navigating a slowing economy. However, the company’s $813 million adjusted EBITDA, resilient April GPV growth, and strategic bets on credit and Bitcoin suggest a path to recovery.
Investors should weigh the risks—macro weakness, regulatory hurdles, and supply chain delays—against the potential of Proto’s Bitcoin hardware and Cash App’s expanding credit ecosystem. With a P/E ratio below its 5-year average and a dividend yield of 0.3%, Block’s stock offers a contrarian opportunity for those willing to bet on its execution over the next 12–18 months.
The key question remains: Can Block’s product velocity and AI-driven efficiencies offset macro headwinds? If April’s 9.6% GPV growth signals a turnaround, the stock’s current price—near its 52-week low—may present a buying opportunity for the bold.
In the fintech arena, patience could pay off—if Square’s bets on innovation and credit penetration hit their marks.
