Dorsey’s Block slows hiring and investment as bitcoin plunge cuts profits

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Aug 4 (Reuters) – Jack Dorsey, led by Block Inc (SQ.N), said it had slowed hiring and would cut its 2022 investment target by $250 million, after a plunge in bitcoin price dragged the digital payments company to a loss in the second quarter.

Shares of Block, formerly called Square, fell nearly 6% in extended trading on Thursday.

Regulatory hurdles facing cryptocurrencies, rising interest rates and the Ukraine crisis have weighed on investors’ appetite for riskier assets, pushing bitcoin prices down around 36% over the past year. trimester.

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This sent Block’s bitcoin gross profit — or what the company makes from the spread on buying and selling the cryptocurrency — down 24% to $41 million.

Block makes bitcoin trading easy with its Cash App online payment service.

“While gross margin trends were healthy through July, we recognize the importance of exercising discipline with our investments as we enter a period of potential uncertainty,” said Chief Financial Officer Amrita Ahuja. during a conference call, while revealing plans to slow down hiring. and investment.

Block’s recently acquired Buy-Now-Pay-Later unit, Afterpay, generated $150 million in gross profit in the quarter, split between the company’s Square and Cash App segments. This helped Cash App post a 29% increase in gross profit.

Net loss attributable to common shareholders was 36 cents per share, compared to a profit of 40 cents last year.

Excluding one-time items, it posted a profit of 18 cents, slightly better than analysts’ estimates of 17 cents per share, according to Refinitiv IBES.

The fintech company is trading at a frothy valuation of almost 65 times its forward earnings, compared to almost 22 times at PayPal (PYPL.O).

“Block’s unique approach to the market should keep them in market leadership for some time to come, given that it has reconciled consumer-centric CashApp with merchant-centric Square,” Richard Gardner, CEO of Modulus Global, a big-budget software provider to Wall Street Clients, said Tuesday.

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Reporting by Mehnaz Yasmin in Bangalore; Editing by Devika Syamnath

Our standards: The Thomson Reuters Trust Principles.

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