Block Inc. Reports Disappointing Q4 Earnings as Investors Cautiously Monitor Future Growth

Block Inc. (NYSE: XYZ) has unveiled its Q4 financial results, posting earnings of $0.71 per share on revenue of $6.03 billion. This falls short of analysts’ expectations, with estimates at $0.87 for earnings and $6.29 billion for sales. Block, previously known as Square, is a fintech company that specializes in digital payments, point-of-sale appliances, and a variety of tech-focused financial services. Their offerings now range from payment processing and loans to banking solutions, as well as facilitating bitcoin trading by purchasing the cryptocurrency for resale.

Beginning the year with a 7% return, Block’s stock has lagged behind the S&P 500 index, which has risen by 28%. Investors expressed concern over slow growth in gross payment volume and a decrease in monthly active users, impacting stock performance considerably in recent months. For those seeking a more stable investment, the High-Quality portfolio has consistently outperformed the S&P, achieving over 91% returns since its inception.

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Analyzing Block’s Q4 Performance

Block generated $6.03 billion in Q4 revenue, marking a 4.5% increase year-over-year. Transaction revenue rose by 5.1% to $1.7 billion, while subscription and services revenue achieved the highest growth, increasing 16.8% to $1.9 billion. However, hardware revenue dipped by 4.3% to $31 million, and revenue from Bitcoin transactions fell by 3.7% to $2.4 billion. Notably, gross payment volume (GPV) reached $61.95 billion, a year-over-year improvement of 7.8%. Additionally, EBITDA of $757 million exceeded expectations, representing a 34.7% increase compared to the prior year. These GPV and EBITDA numbers surpassed street estimates of $61.3 billion and $740 million, respectively.

In terms of profitability, Block’s adjusted operating margins improved to 17%, an increase of 800 basis points from the previous year. Per-share earnings surged by 51% to $0.71. The outlook remains promising, with the company predicting a Q1 gross profit increase of 11% to $2.32 billion and expectations of $10.22 billion in gross profit for 2025, alongside operating margins of 21%.

The Outlook for Block Stock

Post-announcement, Block’s shares experienced an 8% decline in after-hours trading. Such fluctuations have been typical for Block, which has consistently underperformed relative to the overall market over the last four years. Notable stock returns included -26% in 2021, -61% in 2022, 23% in 2023, and a modest 10% in 2024.

In contrast, the Trefis High-Quality (HQ) Portfolio, comprised of 30 individual stocks, has been significantly less volatile. It has consistently outperformed the S&P 500 over the past four years. This suggests that the HQ Portfolio delivers better returns while minimizing risk, making it an appealing consideration for investors looking for steadier growth.

Given the uncertainty in the current economic landscape, including potential interest rate adjustments and geopolitical tensions, Block might continue to face challenges similar to those experienced in the previous four years. Currently priced at $76, Block stock has a price-to-sales ratio of 2.0x, which is below its four-year average of 2.8x. Despite the let-down in recent performance, this valuation seems to reflect the competitive pressures and operational hurdles Block is currently facing. Thus, it may present an enticing opportunity for long-term growth, should conditions improve.

While Block shows potential for future growth, it is essential to compare its performance against its broader industry peers on key metrics. Explore further comparisons across various industries by visiting Peer Comparisons.

[1] Returns as of 2/21/2025
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.