Shares of Block Inc (NYSE:SQ) plunged more than 20% on Friday after the payments company posted a sharp miss on first-quarter earnings and revenue and cut its full-year profit guidance, raising fresh concerns about the growth prospects of its Cash App business.
The company reported earnings of $0.56 per share, well below Wall Street estimates of $0.97, while revenue fell to $5.77 billion, missing expectations of $6.19 billion.
The underperformance was led by a 7% year-over-year decline in Cash App revenue, driven by weaker-than-expected spending on the platform’s Cash Card.
Management attributed the softness to lower seasonal inflows from tax refunds, despite total IRS refund levels remaining steady. Cash App gross profit still grew 10% year over year.
Square, Block’s seller-focused business, showed modest strength with a 7% increase in revenue and 9% gross profit growth, reflecting better performance among mid-market clients and improving U.S. payment volume trends. Square's GPV (gross payment volume) grew 5.6% in the first quarter, narrowing its gap with Visa and Mastercard's US growth.
Despite these pockets of resilience, Block slashed its full-year adjusted profit outlook to $9.96 billion, down from a previous estimate of $10.22 billion, adding to investor concerns following three consecutive quarters of guidance reductions.
Jefferies, which maintains a "Buy" rating on the stock, acknowledged the results were "painful" but argued that the lowered guidance significantly de-risks the path forward.
"The benefit of the doubt is lost after three consecutive prints with cuts, and the bear case on Cash App has won out in the near-term," analysts wrote in a note. However, they pointed to accelerating Square trends and improvements in loan origination capabilities as reasons to remain constructive.
Jefferies reduced its price target to $60 from $70, but still sees 26% upside from Thursday’s closing price of $47.70.
Management emphasized that April trends showed no incremental macro weakness. Square’s US GPV growth reached 9.6% year over year, suggesting a potential rebound in the second quarter and beyond. Block also plans to ramp up hiring for Square’s sales force after encouraging results in core verticals.
Still, with Cash App user growth under scrutiny and profitability projections lowered, investors appear to be demanding clearer signs of sustained momentum.