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Square Q1 sales surge 266% as transactions jump amid economic recovery, bitcoin revenue soars

Square (SQ) reported first-quarter earnings that blew past estimates after market close on Thursday, with the payments company's results boosted by ongoing growth in Cash App and its cryptocurrency offerings. Shares rose more than 1% in late trading.

Here were the main metrics in Square's report compared to consensus estimates compiled by Bloomberg:

  • Revenue: $5.06 billion vs.$3.37 billion expected and $1.38 billion Y/Y

  • Adjusted earnings: 41 cents vs. 16 cents per share expected and a loss of 2 cents per share Y/Y

As a financial technology company, Square's growth ballooned over the course of 2020, with consumers increasingly conducting transactions online and through Cash App.

And with the economic recovery now well under way and consumers flush with savings and stimulus checks, first-quarter transactions grew even further.

Square's transaction services revenue jumped 27% in the first quarter over last year to $960 million, coming in well above the $872.5 million expected. And gross payment volume rose 29% over last year, also rising more than the 17.3% rate expected. Square said it saw "strong growth in customer inflows during the first quarter, driven primarily by government fund disbursements, which helped lead to increased engagement and adoption of more products within our Cash App ecosystem," according to its shareholders letter Thursday.

Record first-quarter results from payments competitor PayPal (PYPL) on Wednesday also underscored the acceleration in digital transactions at the start of 2021. That company's total payments volume grew 50% to $285 billion, and net new active accounts grew by 14.5 million to 392 million.

Digital transactions aside, Square was also expected to have seen a pick-up in in-person transactions, with stay-in-place orders easing across the country over the past several months. Hardware revenue — which includes Square's flagship point-of-sale terminals that provide merchants with devices to accept payments in-stores — grew 39% to $29 million during the quarter. And subscription revenue, including seller subscriptions, surged 88% to $557.7 million, also beating estimates.

But one of Square's biggest growth areas and most lucrative parts of the business was also one of its newest. Square reported that bitcoin revenue surged to $3.51 billion in the first quarter, up from $306 million in the same period last year. However, bitcoin gross profit totaled just $75 million.

Square's Cash App has been allowing users to buy, sell and hold bitcoin for the past three years, and cryptocurrency-related transactions on the platform have soared in recent quarters in tandem with skyrocketing cryptocurrency prices. And in March, Cash App started allowing customers the ability to send and receive bitcoin to other users for free within the app. Square posted its first-ever quarter generating more than $1 billion in bitcoin-related revenue in the third quarter of 2020.

"Bitcoin revenue and gross profit benefited from a year-over-year increase in the price of bitcoin, bitcoin actives, and growth in customer demand," Square wrote in its shareholder letter. "In future quarters, we recognize that bitcoin revenue may fluctuate as a result of changes in customer demand or the market price of bitcoin."

Square also suggested earlier this year that crypto-related momentum continued into the start of 2021: In late February, Square said more than 1 million customers purchased bitcoin for the first time in January 2021, after more than 3 million customers purchased or sold bitcoin on Cash App throughout all of 2020.

Shares of Square have risen 2.2% for the year-to-date through market close on Thursday, slowing after a surge of nearly 250% in 2020.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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