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Square Earnings: Mark Your Calendar

Daniel Sparks, The Motley Fool

Shares of financial technology company Square (NYSE: SQ) have surged in 2019. The stock is up about 45% year to date. Its strong performance comes as the company has continued delivering quarterly results above expectations. In addition, Square recently raised its outlook for 2019 revenue, highlighting the company's impressive momentum.

When Square reports its second-quarter results on Aug. 1, investors will be looking for the fintech company to demonstrate more impressive execution. In particular, investors should look for notable performance in the following three key areas.

A man using the Square Cash App

Square's Cash App. Image source: Square.

Revenue growth

Square's revenue has been skyrocketing in recent years. First-quarter revenue rose 43% year over year to $954 million. The company's adjusted revenue, or revenue excluding transaction-based costs, bitcoin costs, and the effect of deferred revenue adjustment related to purchase accounting, increased 51% year over year to $489 million.

While this growth is impressive, it notably marked the second quarter in a row of decelerating growth after a long stretch of accelerating growth. By Square's third quarter of 2018, the company had reported six consecutive quarters of accelerating revenue growth. But since a 68% year-over-year increase in third-quarter adjusted revenue, the growth rate has been coming down. The top-line figure saw 64% and 59% growth in the fourth quarter of 2018 and the first quarter of 2019, respectively.

Another quarter of deceleration is likely. Management guided for second-quarter adjusted revenue to be between $545 million and $555 million. The midpoint of this guidance range represents 43% year-over-year growth. Analysts, on average, expect revenue to increase 44.5% year over year to $557 million.

Adjusted earnings per share

Square crushed its own guidance for non-GAAP (generally accepted accounting principles) earnings per share in its first quarter. Management had guided for the figure to be between $0.06 and $0.08. Instead adjusted EPS was $0.11, up from $0.06 in the year-ago quarter.

Can Square surprise again in Q2? Management guided for second-quarter adjusted EPS between $0.14 and $0.16. Analysts, on average, are expecting adjusted EPS of $0.16.

Cash App volume

Last but not least, investors may want to check on Square's Cash App volume, or the company's total dollar amount of peer-to-peer, cash card, and cash for business transactions. The company's fast-growing Cash App and the app's widening ecosystem of services for consumers and merchants have made it the primary driver of the company's important subscription- and services-based revenue when revenue from Square's Weebly and Zesty acquisitions is excluded.

Cash App volume was 2.5 times greater in Q1 than in the year-ago quarter. While growth this rapid is likely unsustainable, investors should look for Cash App volume to rise around two times over compared to the second quarter of 2018.

Square is scheduled to post its second-quarter results after market close on Aug. 1.

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Daniel Sparks owns shares of Square. The Motley Fool owns shares of and recommends Square. The Motley Fool has a disclosure policy.