Square Inc. released its second-quarter 2020 earnings on Tuesday, revealing explosive growth in bitcoin-related activities via its Cash App. The payment service generated $875 million in bitcoin revenue, a 600% increase year-over-year, while bitcoin gross profit surged 711% to $17 million. The surge was fueled by higher user engagement and government stimulus programs.
Key Financial Highlights
Square's total net revenue (including bitcoin) reached $1.92 billion, up 64% YoY. Gross profit (including bitcoin) was $597 million, up 28% YoY. Cash App alone contributed $281 million in gross profit, a 167% jump. Excluding bitcoin, Cash App revenue was $325 million in Q2 2020, up 140% YoY.
Analyst Kevin Rooke noted that Square's Q2 2020 bitcoin revenue was nearly three times Q1 2020's volume and 25 times higher than Q1 2018—when Cash App first enabled bitcoin purchases.
Growth Drivers
Square attributed the bitcoin revenue and profit boost to “an increase in bitcoin actives and growth in customer demand.” The company also highlighted the impact of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which provided stimulus payments and unemployment benefits. A portion of Cash App customers direct-deposited these payments into their accounts, which likely catalyzed bitcoin investments.
As of June 2020, Cash App had over 30 million monthly transacting active customers, with more than 7 million spending on Cash Card. Square wrote: “We believe this uplift was partly driven by government stimulus programs.” Beyond bitcoin, Cash App offers peer-to-peer payments, Instant Deposit, stock brokerage, and more, with rising per-customer volumes across the ecosystem.
Accounting Treatment
Square clarified that bitcoin revenue represents the total sale amount of bitcoin to customers, while bitcoin costs reflect the bitcoin purchased to facilitate those sales. Thus, the $875 million figure is the gross transaction value, not Square's net revenue. The $17 million gross profit (revenue minus cost) is Square's actual profit from facilitating bitcoin trades.
Headquartered in San Francisco, Square Inc. trades on the NYSE under the ticker SQ, with operations in the U.S., Canada, Japan, Australia, the U.K., and Ireland. CEO Jack Dorsey also leads Twitter, which recently suffered a major security breach involving a bitcoin giveaway scam—though that incident is unrelated to Square's business.