What happened

Shares of Square (NYSE:SQ) gained 13.9% in value last month, according to data provided by S&P Global Market Intelligence.

The stock got a boost toward the end of February following another impressive quarterly earnings report.

A merchant's hand and a customer's hand interacting with a Square register at checkout.

Image source: Square.

So what

There weren't any surprises from the headline numbers. Total revenue increased 51% year over year to $933 million, driven by growth in gross payment volume of 28% and growth in subscriptions and services of 144%. 

The triple-digit growth in subscriptions and services is likely what impressed investors most about the quarter. It's clear merchants highly value Square's offering, as 51% of gross payment volume is now coming from large sellers, an improvement from 43% in the fourth quarter of 2016. As merchants grow with Square, they are sticking with Square.

Plus, Square is demonstrating the ability to be more than just a merchant services business. It has a huge opportunity to capitalize on the increasing ubiquity of its Cash App, which has 15 million active customers, more than double year over year. Revenue from the Cash App contributed to the company's robust growth in subscriptions and services in the quarter.

Additionally, the company launched the Square Card for merchants, which gives businesses immediate access to cash after a sale. Both the Cash App and the Square Card show how Square is beginning to offer new incentives for individuals and businesses to keep more of their cash with Square instead of transferring it to a bank account. This presents a huge opportunity for the company to offer financial services like a bank and expand its addressable market, which is already massive.

Check out the latest earnings call transcript for Square.

Now what

For 2019, management is calling for adjusted revenue to increase to a range of $2.22 billion to $2.25 billion, representing year-over-year growth of 41% at the midpoint. As for profitability, management expects adjusted EBITDA to be between $405 million and $415 million, or growth of 60% year over year at the midpoint. 

The revenue guidance points to a deceleration in growth from the recent quarter, but overall, it's hard to quibble about 41% growth, especially if Square can exceed its guidance, which it typically does.

In 2019, investors will be closely watching how Square's ecosystem continues to grow around management's three areas of focus: omnichannel, international, and financial services. Management believes it has a significant long-term opportunity across all three areas, as its incredible growth streak clearly demonstrates.  

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