Block’s shares have dropped 16% as investors express concerns about a slowdown in spending growth, shifting focus to its buy-now, pay-later lending strategy. The company’s Cash App business reported 16% gross profit growth in the holiday quarter, down from 25% a year earlier.
The US economy is grappling with trade policy uncertainty and high interest rates, despite a strong labor market and steady wage growth. This has led to muted consumer spending growth, making it challenging for companies like Block to achieve their growth targets.
Block’s business-focused Square unit reported 12% gross profit growth in the quarter, down from 18% a year earlier. The company is expected to lose around $8 billion in market value if losses hold at session close.
Analysts view Block’s buy-now, pay-later lending strategy as key to driving growth and have labeled 2025 as a “now or never” year for the company. With the BNPL market projected to surpass $160 billion by 2032, retailers like Walmart, Target, and Amazon are joining fintech players like Block in offering this service.
Block’s Chief Financial Officer Amrita Ahuja said that Cash App’s growth is expected to accelerate as it scales its Afterpay products and invests in marketing. Despite a weaker first quarter due to leap year and dollar fluctuations, analysts remain optimistic about 2025.
Source: https://www.reuters.com/business/block-shares-drop-spending-slowdown-puts-bnpl-expansion-focus-2025-02-21