Block profit up 25%, Bitcoin unit profit down 31%

Block reported a 25% increase in total gross profit to $3.166 billion for the second quarter, while its Bitcoin Ecosystem gross profit declined 31% year over year to $72 million.

Bitcoin Ecosystem revenue was $1.894 billion in Q2, down about 13% from $2.172 billion a year earlier. Based on the company’s reported revenue and cost figures, the category’s implied gross margin narrowed to roughly 3.82% from 4.84%, a compression of about 102 basis points. That equates to about $38.20 of gross profit per $1,000 of revenue, down from $48.40 a year earlier. By contrast, Commerce Enablement gross profit rose 18% and Financial Solutions gross profit increased 43%.

In its shareholder letter, the company described the bitcoin fee change as ‘a strategic decision’ to reduce the fee charged on certain Cash App bitcoin transactions and cited bitcoin trading dynamics as a factor in the gross-profit decline. Cash App announced on Feb. 9 that it lowered transaction fees and removed fees and spreads for bitcoin buys over $2,000; the Q2 filing refers more broadly to lower fees on “certain” transactions and does not specify an end date. The filing does not quantify how much of the gross-profit decline was due to the fee changes versus trading dynamics.

The filing provides no bitcoin-specific transaction volumes, bitcoin-user counts, or fee revenue per trade. Block reported 59 million monthly transacting Cash App users in June, a metric that does not indicate how many customers bought or sold bitcoin in the quarter.

Separately, Block recorded an $88.474 million bitcoin remeasurement loss in Q2, compared with a $212.165 million remeasurement gain in the prior-year quarter, a swing of about $300.639 million. The remeasurement is a non-operating fair-value adjustment recorded outside Bitcoin Ecosystem revenue, costs and gross profit.

The Bitcoin Ecosystem was the only one of Block’s three gross-profit categories to contract while total gross profit expanded.