Square’s Cash App Generated $65.5 Million in Quarterly Bitcoin Revenue

Square disclosed on May 1, 2019 that bitcoin sales through Cash App generated $65.528 million of revenue in the three months ended March 31. The figure was nearly double the $34.095 million reported for the first quarter of 2018 and marked a new quarterly high for the product in Square’s public results.

The result mattered less as a profit windfall than as evidence that a large U.S. consumer-payments application could place bitcoin buying inside an ordinary financial interface. Square’s Form 10-Q attributed the 92% year-over-year increase to the timing of the product’s 2018 rollout and stronger customer demand in 2019. That explanation was the company’s assessment; the filing did not disclose the number of bitcoin buyers, units sold, average transaction size or trading volume by state.

Revenue was large, but the spread was thin

Square reported $64.696 million of bitcoin cost of revenue for the quarter. Subtracting that cost from bitcoin revenue produces $832,000 of bitcoin gross profit, an arithmetic calculation from the company’s unaudited line items. That equals a gross margin of about 1.27%.

The distinction is essential. The $65.528 million was not a fee figure or net earnings from bitcoin. Square recorded the value of bitcoin sold to customers as revenue and the amount paid to acquire bitcoin as cost of revenue. The headline sales number therefore reflected customer purchase flow through Cash App, while the much smaller difference between the two lines better represented the direct gross economics before operating expenses.

Bitcoin revenue accounted for approximately 6.83% of Square’s $959.359 million total net revenue for the quarter, another calculation from the filing. Yet Square’s own adjusted-revenue measure subtracted bitcoin costs from total net revenue. The company said that treatment helped compare its underlying payments business because bitcoin costs moved with bitcoin revenue.

A consumer distribution signal

Cash App had expanded bitcoin access across all 50 U.S. states by August 2018. By the May 1 filing, Square was showing that the feature could generate measurable demand through a general-purpose payments application. The filing did not prove that Cash App was drawing first-time buyers, taking share from exchanges or producing sustained adoption. It did show that bitcoin was no longer confined to specialist trading venues in Square’s product strategy.

The comparison with Square’s core business kept the scale in perspective. Transaction-based revenue was $656.762 million in the first quarter, roughly ten times bitcoin revenue, while subscription and services-based revenue was $218.857 million. Square as a whole recorded a $38.151 million net loss for the quarter. Bitcoin’s $832,000 calculated gross profit therefore should not be confused with companywide profit or with Cash App’s total profitability.

What the filing established

The most defensible May 1 conclusion was narrow: customer bitcoin purchases through Cash App were growing quickly from a small base, and Square had built a functioning retail distribution channel around them. The company itself warned that bitcoin revenue would fluctuate with market-price volatility and customer demand.

The record had meaningful limits. The reported period ended March 31, one month before the filing. The statements were unaudited, and no venue-level bitcoin price series is needed to establish the accounting figures. The filing also did not report bitcoin inventory, coins sold or customer cohorts, so converting revenue into an estimated number of bitcoins would require assumptions about purchase timing and execution prices.