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Shares of Jack Dorsey’s fintech company Block (SQ) increased by 12% to $49.19 on Friday following the release of optimistic third-quarter earnings figures the previous day.
This includes a rise in Bitcoin revenue from the company’s payment subsidiary, Cash App, which generated 37% more income compared to the same timeframe last year.
Block is Back
According to the report released on Thursday, Block’s total net revenue grew by 24% year over year, reaching $5.62 billion. Excluding “Bitcoin revenue,” this amount decreases to $3.19 billion, reflecting a 16% increase since Q3 2022.
Bitcoin revenue is derived from Cash App’s sales of BTC to users. Only 2% of this revenue – which amounted to $2.42 billion – is retained by the company as gross profit, totaling $45 million for this quarter.
Overall, Block’s adjusted earnings per share were $0.55, surpassing the anticipated $0.47 in adjusted earnings. Gross profit rose by 21% from the previous year, increasing from $1.57 billion to $1.9 billion.
Of this profit, approximately $674 million was transaction-based, while an additional $1.23 billion was derived from subscription and services – representing year-over-year increases of 9% and 25%, respectively.
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Block’s Bitcoin Balance
Block also experienced a boost to its balance sheet due to the appreciation of the BTC on its balance sheet this year. As of September 30, Bitcoin was trading at a value compared to $26,967 exactly one year earlier.
“The carrying value of our investment in bitcoin, after cumulative impairment charges, was $102 million, while the fair value, based on observable market prices, was $216 million, which was $114 million in excess of our carrying value,” stated the company’s shareholder letter.
Under current accounting regulations, Bitcoin held on corporate balance sheets incurs an “impairment charge” when its value decreases, which cannot be reversed if its value subsequently increases.
This is expected to transition to a “fair value” accounting standard for digital assets in 2024, moving away from valuing Bitcoin held in corporate treasuries based on observable market prices.
Coinbase, the leading cryptocurrency exchange in the United States, also exceeded revenue expectations in the third quarter. The company reported $674 million in earnings – primarily generated from subscription and services revenue rather than trading profits.
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