Bitcoin Revenue Up 11 Times, Cash App Grows 171%
Square smashed analysts’ expectations for Q1 earnings after reporting a profit of $0.41 per share compared to the $0.16 per share expected from the surveyed market analysts. Business sales earnings for the quarter were reported at $5.06 billion, again much higher than Wall Street’s consensus of $3.36 billion.
On a year-over-year (YOY) basis, revenue is up 266%, while gross profit jumped by 79%. As far as the guidance is concerned, the fintech company is projecting its gross profit to jump by more than 135% YOY. Furthermore, its Cash App is expected to record a business growth of 130%.
“We delivered strong growth at scale during the first quarter of 2021,” the fintech company said in a statement before adding that its portfolio of business production “continued to support growth of larger sellers.”
Square reported that Cash App made a gross profit of $495 million, which represents a YOY growth of 171%. Business sales from BTC came in at $3.5 billion, which is 11 times higher YOY. However, profits from Bitcoin represent just a bit over 2% of revenue in this business segment, or $75 million in this case.
The company is aggressively tapping into the emerging Bitcoin market as it sees BTC as the internet's native currency. Essentially, its Cash App allows Square users to buy and sell BTC. As of March this year, Cash App offers customers the ability to instantly send Bitcoin for free. Previously, Cash App users had to leave the platform to send BTC to friends and family.
“Our focus, first and foremost, is on enabling ... bitcoin to be the native currency. It removes a bunch of friction for our business. And we believe fully that it creates more opportunities for economic empowerment around the world,” CEO of the fintech company, Jack Dorsey, said in a call with analysts.
Similar to Tesla, Square has invested in Bitcoin to diversify its business holdings. In October, it spent $50 million to buy BTC, and an additional $170 million in February this year. Overall, the BTC business investment is valued at $472 million after the company lost about $20 million in the quarter following a correction in the Bitcoin price.
Still, Square stock price fell in extended trading Thursday after the fintech company warned that its growth might slow down in Q2 as YOY comparisons get tougher. Moreover, a boost from the spending of government checks is expected to fade.
“We believe our customers had greater spending power from government funds, which drove an uplift in inflows in March. We have since seen a normalization with inflows down 16% in April, compared to March,” CFO Amrita Ahuja commented.
Square reported stronger-than-expected Q1 earnings on robust demand for Cash App, which recorded YOY growth of 171%. Moreover, business sales from BTC exploded 11 times compared to a year ago, while the fintech company reported Bitcoin holdings of $472 million.
About the Author
Luigi Wewege is the Senior Vice President and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an instructor at the FinTech School which provides online training courses on the latest technology and innovation developments within the financial services industry. Luigi is also the published author of "The Digital Banking Revolution."