Square Inc. Stock Jumped Thursday -- Here's Why

By Daniel SparksMarketsFool.com

What: Following the company's second-quarter earnings release after the market close Wednesday, shares of mobile payments company Square (NYSE: SQ) leaped as much as 17.6% on Thursday, before paring back its gains to around 10.5% as of 1:50 p.m.

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The jump in the stock price was likely driven by Square's better-than-expected second-quarter results.

Image source: Square.

So what: Square reported revenue and adjusted earnings per share of $439 million and a loss of $0.08, respectively. This compares to revenue of $310 million and an adjusted loss per share of $0.20 in the year-ago period. On average, analysts were expecting the company to report revenue of $406 million and an adjusted loss per share of $0.11.

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With Square's 41% year-over-year increase in revenue driving the company's adjusted EBITDA margin to 7% -- up about 7 points year over year and 14 points sequentially -- investors were likely happy to see proof of operating leverage as sales increase.

In a press release, management said it was "pleased with our second quarter results, which highlight strong growth at scale and a significant profitability milestone."

Now what: Going forward, the company expects better performance than it had originally expected for the year. It wrote:

Over the next year, investors should watch to see if Square continues to demonstrate steps toward regular profitability as sales increase.

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Daniel Sparks has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.