Jack Dorsey-led Block Inc., a market leader in digital payments, has reported a 29% bump in year-on-year earnings, posting $1.47 billion in profit figures. And the cumulative revenue it generated ($4.4 billion) beat the market estimate in Q2 by a billion.
But the key thing to note is that it managed these numbers despite a slump in its Bitcoin (BTC) business. Block Inc., which offers services to support the buying and selling of BTC, registered only $41 million in profit during the same period.
The company attributed the slump to the lack of widespread customer demand and increased price volatility and emphasized that a drop in BTC profits doesn’t reflect the broader business significantly. Besides, the BTC profits in the subsequent quarters can also fluctuate, courtesy of mixed market sentiments.
BTC-specific revenue and profit calculations
The company’s BTC business generated $1.79 billion in revenue but only $41 million in quarterly profits. And the profit figures are down 34% year-on-year, although the overall profit percentage grew by 29%.
The drop in revenue means that providing BTC-related services to customers has become a high-cost gig. The broader uncertainty in the bear market also had a role to play.
It is important to note that the Block also recognized a $36 million impairment loss on BTC holdings, digging a deeper hole in its BTC-specific revenue structure. Yet, that needn’t be an ominous sign. Because “impairment loss” signifies unrealized loss that every company needs to report on intangible assets (like BTC) once the current price drops below the cost basis.
As of 30 June 2022, Block Inc. reported its BTC investment (fair value) at $160 million. July’s relief rally must have improved things a bit.
