Payments company Block (SQ) announced second quarter results Thursday that 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 in the quarter totaled $1.47 billion against Wall Street expectations for $1.46 billion, while adjusted earnings per share of $0.18 topped estimates for $0.16. Excluding bitcoin, total net revenue in the second quarter was $2.62 billion, up 34% year over year.
Cash App’s Borrow feature reported more than 1 million active accounts as of the end of the quarter.
Shares of Block were down as much as 5% in after hours trade.
Compared to the previous quarter, gross profit from bitcoin fell from $43 million to $41 million as the price of bitcoin fell by 57% from $46,262 to below $20,000 per coin in the three months ended on June 30.
Block said the decline in its crypto business was “driven primarily by a decline in consumer demand and the price of bitcoin, related in part to broader uncertainty around crypto assets, which more than offset the benefit of volatility in the price of bitcoin during the quarter .”
“In future quarters, bitcoin revenue and gross profit may fluctuate as a result of changes in customer demand or the market price of bitcoin,” the company added.
Block’s $36 million impairment charge represents an unrealized loss reflecting bitcoin’s value at its lowest level over the quarter due to how digital assets are handled under GAAP accounting rules.
Under these rules, bitcoin’s gain in value from the quarter’s low to its end cannot be reported unless the asset is sold thus the impairment charge reflects bitcoin’s lowest value during the previous quarter, not its Q2 end market value.
Earlier this week, for instance, Microstrategy (MSTR) reported a $917.8 million impairment on its bitcoin holdings,
As of June 30, 2022, Block measured the fair value of its bitcoin holdings at $160 million based on observable market prices, which is $47 million greater than the carrying value of the investment after impairment charges, but far below the $366 million fair value it recognized at the end of the last quarter.
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