Block Reports Q3 Earnings: Consumer Spending Dip

By Arasu Kannagi Basil and Atharva Singh

(Reuters) – Payments firm Block reported third-quarter revenue below Wall Street expectations on Thursday, signaling softer consumer spending and overshadowing a profit beat driven by disciplined expense management.

Shares of the company fell more than 10% in extended trading before paring losses to below 4%.

Consumer spending has normalized from the post-pandemic bounce when Americans splurged on travel and dining out. Analysts believe a soft landing for the economy could boost consumer confidence and reignite spending growth.

Block's total net revenue of $5.98 billion in the reported quarter missed expectations of $6.24 billion, according to estimates compiled by LSEG.

Running Point Capital's chief investment officer, Michael Ashley Schulman, stated that traders might be reacting to the revenue miss, which could indicate larger problems with Block potentially losing transactions to competitors.

Schulman also mentioned that aftermarket trading may have overreacted since Block reported improvements across most profitability metrics.

Additionally, Block disclosed that it had received a draft consent order from the U.S. Consumer Financial Protection Bureau in August relating to an investigation of Cash App's handling of customer complaints and disputes. The company is also in discussions with various money transmission license regulators concerning its compliance program, including its anti-money laundering initiatives.

Block remains optimistic about settling these matters on acceptable terms, which could lead to one or more public orders.

Nevertheless, Block's focus on disciplined expense management helped it beat profit estimates. The company has cut jobs, reduced its real estate footprint, and decreased discretionary spending to drive "profitable growth."

On an adjusted basis, Block earned 88 cents per share, surpassing expectations of 87 cents.

Block's results conclude the earnings season for payments firms, which analysts closely monitor to assess the health of U.S. consumers.

Block shares have dipped 2.7% in 2024, underperforming larger rival PayPal's 32.5% jump.