Block slows hiring, slashes investment by $250m amid losses

Regulatory hurdles facing cryptocurrencies, rising interest rates and the Ukraine crisis have walloped investor appetite for riskier assets, pulling bitcoin prices down about 36% in the quarter

Jack Dorsey-led Block Inc said it has slowed hiring and will slash its 2022 investment target by $250 million, after a slump in bitcoin prices dragged the digital payments company to a loss in the second quarter. Shares of Block, formerly called Square, fell nearly 6% in extended trading on Thursday.

Regulatory hurdles facing cryptocurrencies, rising interest rates and the Ukraine crisis have walloped investor appetite for riskier assets, pulling bitcoin prices down about 36% in the quarter. That sent Block’s bitcoin gross profit – or what the company earns from the spread on buying and selling the cryptocurrency – down 24% to $41 million. Block facilitates bitcoin trades through its online payments service Cash App.

While gross profit trends have been healthy through July, we recognise the importance of exercising discipline with our investments as we enter a period of potential uncertainty, Chief Financial Officer Amrita Ahuja said in a conference call, while revealing the plans to slow down hiring and investment.

Block’s recently acquired buy-now-pay-later unit Afterpay contributed $150 million of gross profit in the quarter, split across the company’s Square and Cash App segments. That helped Cash App post a 29% jump in gross profit.

Net loss attributable to common stockholders came in at 36 cents per share, from a profit of 40 cents last year. Excluding one-time items, it reported a profit of 18 cents, slightly higher than analysts’ estimates of 17 cents a share, according to Refinitiv IBES.

The fintech company is trading at a valuation of nearly 65 times its forward earnings compared with nearly 22 times at PayPal.