Block shares tumbled 10% Friday after the Jack Dorsey-founded fintech missed Wall Street's third-quarter expectations, with its core Square business showing troubling deceleration. The earnings miss highlights growing pressure on payment processors as competition intensifies and growth becomes harder to sustain.
Block just delivered a reality check that sent its stock into a nosedive. The payment giant's third-quarter results landed with a thud Friday, missing revenue estimates by $200 million and showing the kind of deceleration that makes investors nervous about fintech's post-pandemic growth story.
The numbers paint a concerning picture for Jack Dorsey's ambitious vision. Revenue came in at $6.11 billion against Wall Street's $6.31 billion target, while adjusted earnings per share hit just 54 cents compared to the 67 cents analysts expected. But it's the underlying trends that really spooked the market.
Square, the point-of-sale business that built Block's empire, is showing clear signs of fatigue. While gross payment volume grew a respectable 12% year-over-year, gross profit growth decelerated to just 9% from last quarter's 11%. That's the kind of margin compression that keeps CFOs awake at night, especially when you're competing against giants like Stripe and traditional processors fighting for market share.
"Our product and go-to-market strategies are working as we continued to gain profitable market share in our target verticals like food and beverage," CFO Amrita Ahuja told investors during the earnings call. But the company blamed the slowdown on a processing partner change and lower-margin hardware sales - explanations that didn't satisfy a market already jittery about fintech valuations.
The timing couldn't be worse. Block's stock has already fallen 24% year-to-date as investors rotate away from high-growth tech names toward more defensive plays. Friday's 10% plunge adds insult to injury for shareholders who've watched the company struggle to recapture its pandemic-era momentum.
There are bright spots, though. Cash App, Block's consumer-facing digital wallet, delivered the kind of growth investors want to see. Gross profit jumped 24% to $1.62 billion, powered by 58 million monthly active users increasingly embracing the platform's lending products. Cash App Borrow, the company's small-dollar lending service, along with its debit card and buy-now-pay-later offerings, are driving deeper engagement.
Morgan Stanley analysts called themselves "encouraged by the pace of credit expansion at Cash App," focusing on whether the lending push will ultimately drive better customer economics and more direct deposit adoption. It's a crucial test - can Block transform Cash App from a peer-to-peer payment app into the kind of comprehensive financial platform that commands premium valuations?
