Payments company, Block, beat analyst expectations this quarter, but Bitcoin—a key focus for the company—has yet to deliver a meaningful contribution to its bottom line.
The company, led by vocal Bitcoin advocate Jack Dorsey, has devoted significant resources to making the cryptocurrency a part of its business. It introduced Bitcoin trading on its payments platform Cash App in 2018 and since then, the company claims that about 10 million users have taken advantage of the feature, according to its second quarter shareholder letter published Thursday.
In June, Block further added a feature called “round up” which lets a user round up to the nearest dollar when they use their Cash App card and put that spare change into either stocks or Bitcoin.
And of course, the company changed its name from Square to Block late last year to show just how dedicated it was to blockchain technology, which underlies Bitcoin.
But in its second quarter earnings released Thursday, Block’s Bitcoin efforts yielded very little. The company reported that Bitcoin revenue from Cash App fell to $1.79 billion, down 34% from a year earlier. Bitcoin revenue made up about 41% of Block’s overall revenue of $4.4 billion in the second quarter, but it translated into only about 3% of the company’s overall gross profits—a metric that matters more to analysts.
Stephen Biggar, the director of financial services research at Argus Research told Fortune that Bitcoin, “has a very limited impact on profitability, and is not a driver for earnings forecasting.” Biggar pointed out that despite the company’s $1.79 billion in Bitcoin revenue, its Bitcoin costs of $1.74 billion, basically canceled it out, amounting to about 98% of its revenue.
Block’s gross profit from Bitcoin fell to $41 million from the $43 million it recorded in the first quarter. This came after Bitcoin prices plummeted 50% in Q2 alone, while trading down 66% from its all-time-high of nearly $69,000 last November.
Apart from its Bitcoin profits, falling crypto prices hit the company’s Bitcoin holdings as well. Block’s Bitcoin investment, which amounted to $220 million invested over 2020 and 2021, is still in the black, but because of falling prices the company also took a $36 million impairment charge on its investment in the second quarter.
The lackluster returns Block has earned from Bitcoin are also not the only matters of concern, said Biggar, noting that impending regulation by the U.S. government also creates uncertainty.
“The end game on bitcoin and cryptos generally, along with potential pitfalls from upcoming regulation, are not well understood,” he said.
All of these pitfalls have not stopped Dorsey from including Bitcoin in his grand vision of a “super app,” to bring Block’s Bitcoin trading, Afterpay business, peer-to-peer payments and more under one application. Ultimately, Dorsey wants to build something that customers use every day. Bitcoin is a key part of that, he said on Thursday.
“We can build something that is at least a weekly if not, every two weeks use case and then get to more and more daily use cases which, ultimately is our goal. We saw a step towards that with Bitcoin…” Dorsey said.
Block did not immediately respond to Fortune’s request for comment.
Block’s stock fell more than 6% in pre-market trading despite the company’s overall gross profit of $1.47 billion falling just short of the $1.48 billion analysts expected according to Factset. Its gross profit was up 29% from the $1.14 billion profit the company recorded a year ago. Block reported earnings per share of $0.18, beating analyst expectations of $0.16, according to Factset.
Block’s shares were trading up 1% at $90 on Friday morning.
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