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01/15 10:36
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary and Q&A indicate strong financial performance, with growth in gross profit and operating income, alongside strategic investments in product development, sales, and partnerships. Positive factors include robust Cash App Borrow performance, AI integration, and new Bitcoin integration. Although management was vague about some future growth timelines, the overall sentiment is optimistic with accelerated growth across key metrics. This, combined with positive guidance and strategic initiatives, suggests a positive stock price movement over the next two weeks.
Gross Profit Grew 18% year-over-year to $2.66 billion, accelerating from 14% growth last quarter, driven by Cash App.
Adjusted Operating Income $480 million, showing strong profitability even in a quarter where investments were made to drive long-term growth.
Cash App Gross Profit Grew 24% year-over-year in the third quarter, accelerating from 16% in the second quarter. Growth driven by improvements in app experiences, onboarding, referrals, and core payment flows.
Cash App Gross Profit Per Monthly Transacting Active Grew 25% year-over-year to $94. Growth attributed to strategies to deepen engagement.
Primary Banking Actives Grew 18% year-over-year to 8.3 million, up from 8 million in the second quarter.
Cash App Borrow Originations Grew 134% year-over-year with stable risk loss and strong annualized net margins of 24%. Growth driven by expansion to new states and underwriting improvements.
Square Gross Profit Grew 9% year-over-year in the third quarter. Growth driven by product and go-to-market strategies, gaining market share in target verticals like food and beverage.
GPV (Gross Payment Volume) Grew 12% year-over-year with acceleration in both the U.S. and international markets.
GPV from Sellers Above $0.5 Million in Volume Grew 20% year-over-year, reflecting the strongest growth rate for these sellers since Q1 2023.
International GPV Grew 26% year-over-year, with particular strength in the telesales channel.
Transaction, Loan, and Risk Loss Expense Grew 89% year-over-year due to investments in scaling lending products like Borrow and post-purchase BNPL.
Adjusted EBITDA $833 million in the third quarter.
Adjusted Operating Income Margins 18% in the quarter.
Post-Purchase BNPL and Borrow Losses Losses continue to trend below the 3% target.
Stock Repurchase Approximately $1.5 billion repurchased by the end of September 2025.
Post-purchase Buy Now Pay Later (BNPL) on Cash App Card: Scaled to $3 billion in annualized originations by early October.
Square AI: Launched as a business partner integrated into seller tools, providing insights in minutes.
AI-driven Order Guide and Voice Ordering: Introduced to help sellers manage procurement and automate phone orders during peak times.
Multichannel menu management and unified third-party delivery app management: Announced to improve seller operations, including 30% faster order times.
Proto Bitcoin mining business: Generated first revenue through hardware sales, including ASICs and mining rigs.
Cash App: Gross profit grew 24% YoY, reaching 58 million monthly actives in September. Primary banking actives grew 18% YoY to 8.3 million.
Square: Gross profit grew 9% YoY, with GPV up 12%. International GPV grew 26% YoY, with strength in telesales.
Neighborhoods on Cash App: Launched to connect sellers with 58 million monthly actives, offering local rewards and marketing tools.
Operational efficiencies in Cash App: Improved onboarding, referrals, and payment flows, reducing friction and boosting engagement.
Operational flexibility at processing partner: Increased costs by 2.6 percentage points but expected to normalize by Q2 2026.
Capital allocation: Repurchased $1.5 billion in stock and plans to continue returning capital to shareholders.
Focus on AI and automation: Driving growth through AI tools like Square AI and Cash App Releases.
Expansion in lending products: Scaled Borrow loans and post-purchase BNPL with stable risk loss and strong margins.
Macroeconomic Conditions: The company acknowledges that changes in macroeconomic conditions pose risks and uncertainties that could materially impact their forward-looking statements and actual results.
Operational Flexibility Costs: The decision to increase operational flexibility at a processing partner has modestly increased processing costs, creating a 2.6 percentage point headwind to Square gross profit in the third quarter, which is expected to persist until the second quarter of 2026.
Transaction, Loan, and Risk Loss Expense: Transaction, loan, and risk loss expenses grew 89% year-over-year due to investments in scaling lending products like Borrow and post-purchase BNPL. While losses are below the 3% target, the rapid scaling of these products introduces financial risks.
Bitcoin Mining Business (Proto): The Bitcoin mining business is in its early stages, with only modest contributions to revenue so far. The company is pursuing a pipeline for 2026, but the business remains a potential risk due to its nascent stage and reliance on future demand.
Interest Expense: Net interest expense is expected to be $45 million in the fourth quarter, reflecting recent debt raises and benchmark rates, which could impact profitability.
Gross Profit Growth: For the fourth quarter of 2025, gross profit is expected to grow over 19% year-over-year to $2.755 billion. Full-year gross profit guidance is $10.243 billion, reflecting more than 15% year-over-year growth.
Adjusted Operating Income: For Q4 2025, adjusted operating income is expected to be $560 million with margins expanding to 20%. Full-year adjusted operating income is projected at $2.056 billion, growing nearly 28% year-over-year.
Rule of 40: The company expects to approach Rule of 40 as it heads into 2026, combining gross profit growth and adjusted operating income margin.
Tax Rate and Interest Expense: The 2025 and long-term tax rate is expected to be in the mid-20% range. Net interest expense for Q4 2025 is projected at $45 million, which is also indicative of long-term expectations.
Borrow and Lending Products: Investments in scaling Borrow and other lending products are expected to continue, with Borrow losses trending below the 3% target.
Bitcoin Mining Business (Proto): The company is actively pursuing a robust pipeline for Bitcoin mining hardware sales in 2026 and beyond.
Stock Repurchase: So far this year to the end of September, we have repurchased approximately $1.5 billion of stock, and we intend to continue returning capital to shareholders as we generate cash.
The earnings report shows significant revenue growth (88%) and strong retail expansion (206%), along with a positive acquisition premium (64% to 102%). Despite a decline in gross margin, the strategic acquisition by ETI and the financial improvements suggest a positive outlook. The Q&A section didn't reveal any major concerns, though management's lack of clarity on ETI's U.S. strategy could be seen as a minor risk. Overall, the financial performance and acquisition terms are likely to drive a positive stock price movement.
The earnings call summary and Q&A indicate strong financial performance, with growth in gross profit and operating income, alongside strategic investments in product development, sales, and partnerships. Positive factors include robust Cash App Borrow performance, AI integration, and new Bitcoin integration. Although management was vague about some future growth timelines, the overall sentiment is optimistic with accelerated growth across key metrics. This, combined with positive guidance and strategic initiatives, suggests a positive stock price movement over the next two weeks.
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