The Block (ASX: XYZ) share price has fallen more than 20% after the business announced its FY25 first quarter update.
Block is the business behind Square and Afterpay.
Block FY25 first quarter
The company reported that its quarterly gross profit for the three months to 31 March 2025 rose 9% year on year to $2.29 billion.
Block said its gross profit growth was lower than expected because of “softer inflows and cash app card spending than forecast.”
Its cash app gross profit increased 10% year on year to $1.38 billion and Square gross profit rose 9% to $898 million. In the first quarter, Square’s gross payment volume (GPV) rose 7.2%, with US GPV growing 5.6% and international GPV growing 15%. It said it continues to gain market share across its target industries.
Block’s adjusted operating profit grew by 28% to $466 million and operating profit increased 31.6% to $329 million.
Adjusted earnings per share (EPS) increased by 19% to $0.56.
It is still focused on enhancing its profitability while investing in long-term growth and it’s still expecting to accelerate growth in the second half of 2025, with 2025 gross profit growth expected to be in the mid-teen range.
Growth initiatives
The business is rolling out a number of new features that it has been testing for a while.
It’s rolling out Cash App Borrow, which will be for small dollar, short-duration loans. This will be offered to millions more active cash app users, and nearly doubling the number of actives it can service after receiving FDIC approval to use Square Financial Services to issue consumer loans for Cash App Borrow nationwide.
It also said it’s evolving its Borrow terms, which it expects will allow it to increase limits and improve its customer experience. On top of that, it will increase its Borrow limits for actives using the Paycheck Deposit as a tool to drive engagement with its customer base.
Block expects these change will drive gross profit growth through increased originations and improved unit economics. This is also expected to help retaining clients, boost engagement rages and direct deposit attach rates.
Outlook for the Block share price
The company is now expecting gross profit to grow 12% to $9.96 billion in 2025 because of a more dynamic economic environment. That reflects a more cautious stance.
It expects to make $450 million of adjusted operating profit in the second quarter and $1.9 billion of adjusted operating profit for the full-year.
After such a large sell-off, this could be an opportunistic time to look at the business. We’ll have to see whether the market is being too pessimistic in the short-term (or not).
