UPDATED 21:26 EDT / MAY 06 2020

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Square shares drop while PayPal surges as both deliver mixed earnings

Financial technology giants Square Inc. and PayPal Holdings Inc. delivered mixed results in their quarterly earnings reports today as the global COVID-19 pandemic shifts consumer spending.

Square saw its share price drop 4% in after-hours trading as investors were generally not happy with the company’s earnings report. PayPal, by comparison, rose 8.5%.

For the quarter ended March 31, Square reported net revenue of $1.38 billion, up 44% from a year ago, with a gross profit of $539 million, up 36%. The problem for Square was its net income line, which came in at a $106 million loss.

When a company boasts about its changes year-over-year in its earnings report but leaves out a comparison figure for its net income in its earnings report, something is amiss. In this case, Square had been predicted by analysts to have a 13-cent-a-share net income profit for the quarter but instead reported a two-cent loss. In the same quarter of 2019, Square reported a net profit of 11 cents a share.

Among Square’s financials was a notable change in its revenue mix. Gross payment volume, while up 14% year-over-year, was the lowest Square had processed since the first quarter of 2019, at a time when online sales have been surging. Offsetting that, however, was a surge in its cryptocurrency business.

Square first started offering support for bitcoin in 2018 and booked $36.5 million in revenue from its support in the second quarter of 2018. Fast forward to today, and Square booked $306 million in bitcoin revenue in the quarter. As a percentage, bitcoin now accounts for nearly 14% of Square’s net revenue by quarter, according to Coindesk.

PayPal also missed in its quarterly earnings, reporting a net profit of $84 million or 7 cents a share, down from $667 million or 6 cents per share in the first quarter of 2019. Analysts were predicting 38 cents a share. Revenue rose 12% from a year ago, to $4.62 billion.

Why PayPal shares surged while Square shares struggled came down to guidance. Square said in its report that in April alone, transaction-based gross profit fell 39% and that measures taken to support its sellers through COVID-19 would have a material impact on subscription and services-based gross profit.

PayPal, on the other hand, said it’s seeing record user and merchant growth, adding 7.4 million net new customers in April after adding 20.2 million net new active accounts in the first quarter. Transaction volume in April rose 20% year-over-year while revenue grew 17%.

The company said it expects net revenue to grow 13% and adjusted revenue to rise between 15% and 20%.

Image: Tim Reckmann/Flickr

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