Dorsey’s Block To Cut Expenditures After Crypto Loss

Jack Dorsey-led Block has said it plans to slow hiring and reduce its investment target for 2022 by $250 million (£207m) as it reported a loss for the second quarter that it attributed to a drop in Bitcoin prices.

Block, formerly named Square, operates Square payment platform for medium-sized businesses, as well as other businesses including the Cash App mobile app, formerly Square Cash, that allows transfers between users and between users and businesses.

Block has invested heavily in Bitcoin and the cryptocurrency has seen its prices decline 36 percent during the quarter as macroeconomic pressures prompt investors to sell off riskier assets.

Crypto volatility

That in turn drove down Block’s Bitcoin gross profit, which it earns from buying and selling the cryptocurrency, by 24 percent to $41m.

Cash App has supported Bitcoin buying and selling since 2018, as well as person-to-person Bitcoin transfers and other transactions involving the cryptocurrency.

Block chief financial officer Amrita Ahuja told an earnings call that gross profit trends had been “healthy” in July but that it was important to excercise “discipline” with the company’s investments “as we enter a period of potential uncertainty”.

Block’s recently acquired buy-now-pay-later service Afterpay added $150m of gross profit split across the Square and Cash App units, helping Cash App post a 29 percent increase in gross profit.

‘Uncertainty’

The company registered a net loss attributable to common stockholders of 36 cents per share, down from a profit of 40 cents a year earlier.

Excluding one-time items Block reported a profit of 18 cents, just over analysts’ estimates of 17 cents per share, according to Refinitiv.

Block said the declines in revenue and gross profit were driven primarily by a decline in consumer demand and the price of Bitcoin, related in part to “broader uncertainty around crypto assets”.