Gross payments volume (GPV) for Square, which provides payments solutions to small- and medium-sized businesses, grew 12% in the third quarter from a year ago, matching levels last seen over two years earlier.
But gross profit growth slowed to 9.22% in the quarter ended September 30, trailing GPV growth for the first time since the first quarter of 2023, according to a Reuters analysis of company filings.
“We’ve generally seen a renewed focus on profitability over growth among investors,” analysts at brokerage Morgan Stanley wrote.
They added that investors are prioritizing understanding Block’s “path to consistently delivering Rule of 40-plus,” which requires the percentages of revenue growth rate and profit margin to add up to at least forty.
The losses, if they hold, would wipe out nearly $5 billion in market value. After a rocky start to the year, the shares had rallied 30.6% since March 31, leading up to the quarterly results after hours on Thursday.”We believe Square’s performance drives the stock, as it is viewed as the higher-multiple business compared to Cash App,” said analysts at Truist Securities.Despite markets hovering near record highs, the U.S. consumers as well as small and medium businesses have started to show signs of weakness, prompting concerns across Wall Street over credit quality in the lower-income segment.
Block’s transaction, loan, and consumer receivable losses rose 89% to $363.5 million, driven by higher short-term consumer borrowings in the Cash App. This could make investors sensitive, given additional balance sheet risk, analysts at RBC Capital Markets said.
Still, some analysts see strength in Block’s ability to leverage the younger consumers’ preference for easier-to-use digital platforms, higher-yield savings and better liquidity.