Square Reports Bitcoin-Related Revenue up 200%; Buys Afterpay

Square said in shareholders letter that its bitcoin gross profit jumped to $55 million from $17 million a year prior while crypto-related revenue hit $2.72 billion

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key takeaways

  • Square reported triple-digit gains in bitcoin revenue on-year, despite a quarterly decline in revenue
  • A $29 billion takeover of Austria-based Afterpay allows consumers to finance the purchase of retail goods at interest rates less than credit cards

In a second quarter shareholder letter released over the weekend, Square reported that its revenue from bitcoin-related services was up 200% on-year but down quarter-over-quarter because of market trends. 

Square said that the Cash App generated $2.72 billion of bitcoin revenue and $55 million of bitcoin gross profit during the second quarter of 2021.

Overall, Square’s Cash App generated $3.33 billion of revenue and $546 million of gross profit, according to the shareholder letter. Excluding all bitcoin-related revenue, Cash App generated $606 million in revenue during the quarter. 

However, this last quarter’s bitcoin bear market — which saw the price of bitcoin fall dramatically in May and linger in the low-$30k range — hit Square’s quarterly revenue growth hard. The company said the “relative price stability” of crypto post-crash was a turn-off for traders and caused Square to post an impairment loss on its books of $45 million, as the value of bitcoin had declined below its purchase price. 

“In future quarters, bitcoin revenue and gross profit may fluctuate as a result of changes in customer demand or the market price of bitcoin,” Square reported.

As of the quarter that ended June 30, the “fair value” value of the company’s bitcoin was $281 million according to the shareholder letter. Square recently bought 3,318 bitcoin in February for $170 million.

Afterpay acquisition

Separately, Square announced that it had initiated a $29 billion takeover of Austria-based Afterpay, paying $92.65 per share.

Afterpay offers a “buy now, pay later” service that allows consumers to finance the purchase of retail goods at interest rates less than credit cards. This service is expected to be integrated into Cash App’s merchant suite, allowing users to initiate lines of credit similar to PayPal’s “pay later” function. 

In a note, Compass Point Research’s Michael Del Grosso gave Square’s stock a “neutral” rating, questioning the $29 billion purchase price and wondering if there wasn’t an “alternative way to do this deal.”

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