Square results beat analysts’ expectations. So why did shares plunge 21%?

Reporting from San Francisco —  Shares of Square Inc. took a beating after the financial services company announced its first-quarter earnings on Thursday, plunging 21% at market close on Friday, to $10.23.

Despite reporting strong revenue, which increased 51% from the company’s previous quarter to $379 million and exceeded analysts’ estimate of $344 million, its operating expenses surged. Those expenses grew to $207 million, an overall increase of 72%.

The company reported a loss of $96.8 million, wider than its year-earlier loss of $48 million. This represented a loss of 29 cents per share.

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Square has been under intense scrutiny since it went public last year at $9 a share, below its planned range of $11 to $13. Its stock has fallen as low as $8.39 in February.

That pressure likely won’t let up soon. The company’s 180-day post-IPO lockup period will expire May 16, after which 64 million stock options and warrants can be exercised — potentially diluting the company’s value.

Analysts and investors have also been watching closely to see how Chief Executive Jack Dorsey, who holds the same title at Twitter, navigates the leadership of two publicly traded companies, both of which are struggling with growth and losing cash. Twitter shares hit an all-time low this week.

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Square faces challenges from competition such as PayPal, and the cash advances and loans arm of its business, Square Capital, was slow to grow because of “more challenging credit market conditions,” Dorsey said on the company’s earnings call.

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