StoneCo Surges While Block Faces Challenges in 2025 Fintech Market

In 2025, Brazilian StoneCo (STNE) and American Block (XYZ) have emerged as key players in the fintech sector, both specializing in integrated payment services for small and medium enterprises.

StoneCo’s Strong Q1 Performance Exceeds Estimates

StoneCo has had a solid start this year, reporting first-quarter adjusted earnings that exceeded the Zacks Consensus Estimate by 6.3% and grew 17.2% year-over-year. The company achieved a 19% rise in gross profit, driven by effective repricing and reduced funding spreads.

Block’s Steady Growth Amid Revenue Challenges

In the same quarter, Block achieved a 28% increase in adjusted operating income and a 15% rise in adjusted EBITDA. Its Square segment experienced a 9% growth in gross profit thanks to increased gross payment volumes and the expansion of banking products.

StoneCo’s Year-to-Date Stock Performance

Year-to-date, StoneCo shares have risen by 67.3%, outpacing the Internet-Software industry’s 14.7% gain and the S&P 500’s slight increase of 0.8%. Conversely, Block shares saw a decline of 27.3%, primarily due to poor performance from Cash App.

StoneCo’s Growth Momentum

In the first quarter of 2025, StoneCo reported a 19% revenue increase year-over-year, mainly from its payments, financial services, and software divisions. Revenues from Financial Services rose 20%, while Software revenue improved by 11% due to expanded client engagement.

Shareholder Returns and Financial Strategy

StoneCo returned approximately R$1 billion to shareholders through aggressive buybacks in early 2025, with R$843 million repurchased in the first quarter alone. The company initiated a new R$2 billion share repurchase program, reflecting a robust capital management strategy.

Block’s Market Position and Innovations

Block’s Square segment is regaining market share, with a 9% gross profit increase and 8.2% growth in gross payment volume year-over-year. Despite a challenging quarter for Cash App, Block aims to expand its user base and scale Cash App Borrow following FDIC approval.

Block’s Revenue Growth and Financial Discipline

Block’s financial management remains solid, as evidenced by a 15% rise in adjusted EBITDA and a 28% increase in adjusted operating income. They generated $1.53 billion in adjusted free cash flow over the past year, up from $1.07 billion previously, while also repurchasing $600 million in stock through April 2025.

Valuation Comparisons

StoneCo trades at a forward price-to-earnings (P/E) ratio of 8.75, above its one-year median of 8.20, while Block’s forward earnings multiple is 19.79, below its median of 31.86. Both stocks are viewed as undervalued compared to the industry average P/E of 37.59.

Investment Snapshot: StoneCo vs. Block

StoneCo shows strong financial momentum and disciplined cost management, making it a more attractive investment than Block, which is rated Zacks #3 (Hold). StoneCo outperformed its growth guidance while Block faces short-term uncertainties due to Cash App’s performance.