Block Payment Company (SQ) announcement Second-quarter results on Thursday showed bitcoin revenue from its Cash App product fell 34% to $1.79 billion, with the company taking a $36 million charge on its bitcoin investments.
Gross profit for the quarter totaled $1.47 billion against Wall Street’s expectations for $1.46 billion, while adjusted earnings per share of $0.18 beat estimates by $0.16. Excluding bitcoin, total net income in the second quarter was $2.62 billion, up 34% year-over-year.
Cash App’s Borrow feature reported more than one million active accounts at the end of the quarter.
Block shares were down as much as 5% in after-hours trading.
Compared to the previous quarter, bitcoin gross profit fell from $43 million to $41 million as the price of bitcoin fell 57% from $46,262 to less than $20,000 per coin in the past quarter. three months ended June 30.
Block said the decline in its crypto business was “primarily driven by lower consumer demand and the price of bitcoin, linked in part to broader uncertainty around crypto assets, which more than offset the upside. bitcoin price volatility during the quarter. .”
“Over the next several quarters, bitcoin revenue and gross profit may fluctuate due to changes in customer demand or the market price of bitcoin,” the company added.
Block’s $36 million impairment charge represents an unrealized loss reflecting the value of bitcoin at its lowest level in the quarter due to the way digital assets are treated under GAAP accounting rules.
Under these rules, bitcoin’s gain in value between the quarter’s low and its end can only be reported if the asset is sold. Thus, the impairment charge reflects bitcoin’s lowest value in the previous quarter, not its market value at the end of the second quarter.
Earlier this week, for example, Microstrategy (MSTR) reported a $917.8 million writedown on its bitcoin holdings,
As of June 30, 2022, Block assessed the fair value of its bitcoin holdings at $160 million based on observable market prices, which is $47 million higher than the investment’s book value after impairment, but well below fair value by $366 million. recognized at the end of the last quarter.