Why is the Block share price rocketing 10% on Friday?

This payments company outperformed expectations during the first quarter.

| More on:
Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Block Inc (ASX: SQ2) share price is ending the week with a bang.

In morning trade, the payments company's shares are rocketing 10% to $116.39.

Why is the Block share price rocketing today?

Investors have been fighting to get hold of the company's shares this morning after its quarterly update smashed expectations.

During the first quarter, the company's gross profit increased 22% year on year to US$2.09 billion.

This reflects a 25% increase in Cash App gross profit to US$1.26 billion and a 19% lift in Square gross profit to US$820 million.

This growth was underpinned by a 6.4% increase in gross payment volume to US$54.4 billion and improved margins. This ultimately led to adjusted EBITDA increasing 91% to US$705 million, net income jumping 380% to US$472 million, and adjusted earnings per share almost doubling to 85 US cents.

How does this compare to expectations?

While the company's gross payment volumes fell a touch short of expectations, this couldn't stop Block from smashing the market's earnings estimates.

The consensus estimate was for earnings per share of 73 US cents, whereas the company reported 85 US cents. This goes some way to explaining why the Block share price is surging on Friday.

Management commentary

Block's chief operating officer and chief financial officer, Amrita Ahuja, was pleased with the quarter. On the earnings call, she said:

We delivered strong results across the company during the first quarter. Gross profit was $2.09 billion, up 22% year over year, consistent with the fourth quarter. Adjusted EBITDA was $705 million, nearly doubling year over year, and Adjusted Operating Income was $364 million, up 7x year over year.

Our profitability improved as we showed discipline across a range of expenses, ending the quarter below our 12,000 person cap and achieving leverage on corporate overhead expenses. For the twelve months ending in March, Adjusted Free Cash Flow was $1.1 billion, up more than 2.5x versus the prior twelve months and represented 50% of Adjusted EBITDA, an improvement compared to the 36% conversion rate in the prior period.


Also giving the Block share price a boost today is management increasing its guidance for FY 2024 after just one quarter. Ahuja said:

We are raising our full-year 2024 guidance for both gross profit and profitability, not only reflecting the Q1 outperformance, but also reflecting our raised expectations for the remainder of the year. For full-year 2024, we are now expecting gross profit of at least $8.78 billion, or 17% growth year over year.

We expect Cash App's gross profit growth to moderate slightly from the first quarter's 25% as we lap some meaningful pricing and structural cost benefits, with relatively stable growth from the second quarter through fourth quarter.

The company has also lifted its adjusted EBITDA guidance to US$2.76 billion for FY 2024. This compares to its previous guidance of US$2.63 billion.

The Block share price is now up 33% since this time last year.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Block. The Motley Fool Australia has positions in and has recommended Block. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Technology Shares

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Technology Shares

The little-known ASX tech stock that could rise 25% in a year

A leading broker thinks this business has excellent growth potential.

Read more »

A woman jumps for joy with a rocket drawn on the wall behind her.
Technology Shares

This disruptive speculative ASX stock could rise 75% in 12 months

Analysts at Bell Potter think this could be a great option for investors with a high risk tolerance.

Read more »

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Man with rocket wings which have flames coming out of them.
Technology Shares

Guess which little-known ASX tech stock has soared 18% as a private investor strikes

It was a great day on the ASX for this tech player.

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Technology Shares

Founder of ASX tech company offloads shares worth $16 million after doubling in a year

Should investors be worried over this $16 million insider sale?

Read more »

A woman holds a glowing, sparking, technological representation of a planet in her hand.
Technology Shares

Nvidia shares are now worth more than 17 times the market cap of BHP. What's next?

With the AI boom in full pace, what's in store for the tech giant?

Read more »

A graphic image of the world globe surrounded by tech images is superimposed on the setting of an office where three businesspeople are speaking together while standing.
Share Market News

Here's how the ASX 200 market sectors stacked up last week

ASX technology shares led the market with a 2.8% gain this week.

Read more »

A happy elderly couple enjoy a cuppa outdoors as the woman looks through binoculars.
Technology Shares

Could the Xero share price leap a further 35% as profits begin to flow?

An expert has predicted this tech stock to make strong returns.

Read more »