Block shares crater 22% on disappointing Q1 results, guidance cut

Investing.com -- Jack Dorsey’s Block Inc (NYSE:XYZ) shares tumbled nearly 22% in premarket trading Friday after the financial technology company reported first-quarter results that fell short of expectations and provided weaker-than-expected guidance.

The company, formerly known as Square, posted adjusted earnings per share of $0.56, well below the $0.98 analysts were expecting. Revenue came in at $5.77 billion, missing estimates of $6.21 billion.

Block’s gross profit, a key metric for the company, grew 9% YoY to $2.29 billion in Q1. However, this was below the company’s expectations, with Cash App gross profit growth coming in softer than forecast.

"Our growth in the first half of this year does not meet our bar," the company said in its shareholder letter.

Looking ahead, Block lowered its full-year 2025 gross profit outlook to $9.96 billion, below the $10.18 billion analysts were projecting. For Q2, the company expects gross profit of $2.45 billion, also short of the $2.53 billion consensus estimate.

The company’s adjusted operating income (AOI) guide of $450 million also missed analyst estimates of $529 million. 

Moreover, Block cut its 2025 AOI outlook by 14% to $1.9 billion, down from the previous estimate of $2.1 billion. According to Bank of America analysts, this implies a margin of 19%, compared to the earlier projection of 21%.

Block cited a more cautious stance on the macroeconomic environment in its reduced guidance. The company now expects to exit 2025 with gross profit growth in the mid-teens range, down from previous expectations.

Bank of America analysts expect Block shares "to be in the penalty box near-term." 

"The cut to ’25 AOI guidance was not anticipated," they added.

Meanwhile, Barclays (LON:BARC) analysts expect the stock to be "down materially" today, they believe the latest change in annual outlook "may have reset expectations for a more achievable full-year bar vs. a wider range of macro outcomes."

Despite the disappointing results, Block highlighted progress on strategic initiatives, including expanding its Cash App Borrow offering and launching new features for Square sellers. The company said it remains focused on accelerating growth in the second half of 2025.

"We understand the drivers behind our recent deceleration in growth and have incorporated updated views on the macro environment into our revised guidance for the year," Block CEO Jack Dorsey said.

Luke Juricic contributed to this report.