Key Takeaways EPS was -$0.03 vs. the -$0.05 analysts expected

Revenue, which was expected to decline slightly year-over-year, rose substantially.

Gross Payments volume fell, but by less than expected.

What Happened

Square was meant to report earnings after markets closed on August 5, 2020, but its earnings leaked and were reported by Bloomberg after markets closed on August 4. The news was positive. Sales, which analysts had expected to decline slightly, actually grew substantially year-over-year. Losses per share were also less than anticipated and while gross payments volume (GPV), the total value of transactions Square processes, declined, the decline was also smaller than expected. Square's stock rose by more than 10% in after-hours trading Tuesday, and are slightly higher today.

(Below is Investopedia's original earnings preview, published July 29, 2020.)

What to Look For

Square Inc. (SQ) is feeling the negative financial impact of the pandemic-induced economic downturn even as its shares are dramatically outperforming the stock market. The financial services company, co-founded by Twitter Inc. (TWTR) CEO Jack Dorsey, specializes in processing transactions between merchants and their consumers. And Square's transactions these days are plummeting amid the global slowdown, hurting its main source of revenue.

Investors will be watching to see how badly these forces are hurting Square when it reports earnings on August 5, 2020 for Q2 FY 2020.﻿﻿ Analysts expect Square to report its second straight quarter of losses on declining revenue.

Investors also will be watching a key Square metric in the Q2 report that reflects transaction volumes: gross payment volume (GPV). GPV is Square's main gauge of the total dollar amount being transacted through its payment ecosystems. Analysts expect GPV to plunge 29.8%, the first quarterly decline in at least four years.

Despite these negative forecasts, Square's stock has tripled from its March 2020 lows. Over the past 12 months, the company's shares have provided investors with a total return of 54.0% compared to the S&P 500's total return of 6.5%. All data is as of July 28, 2020.

Source: TradingView.

Square's stock has risen sharply despite reporting disappointing Q1 FY 2020 results on May 6. The company posted its first loss since going public in 2015, reporting adjusted earnings per share (EPS) of -$0.02. That was a dramatic turnaround from adjusted EPS of $0.12 a year earlier in Q1 FY 2019. Despite this, Square reported a 44.0% increase in revenue, which was consistent with growth rates posted over the past few years.﻿﻿

The company gave a major warning sign to investors in its Q1 report. It said that its Seller ecosystem, which provides financial services to merchants, experienced a significant downturn in the last two weeks of the quarter due to COVID-19.﻿﻿ This happened even as Square's Cash App ecosystem experienced higher volumes, posting in April the best month ever for net-new transacting customers, peer-to-peer volumes, Cash Card spend, and other services.﻿﻿

Even with Cash App's success, analysts are forecasting a dismal Q2 FY 2020, with the company posting widening net losses. They estimate adjusted EPS of -$0.05, more then double the size of the loss in Q1. Revenue is expected to fall 2.2%. This would be the first revenue decline since Square went public, and a stark contrast to the robust revenue growth rates ranging between 41-51% posted in each of the past eight quarters.﻿﻿