Visa’s second-quarter net revenue increased by 16% when ignoring currency to $11.2bn (consensus: $10.7bn). The performance was underpinned by resilient consumer spending with double digit increases in all revenue lines.
Underlying net profit grew 17% to $6.3bn, $0.4bn higher than market forecasts.
First half free cash flow fell by $0.4bn to $9.0bn largely due to the adverse timing of receipts and payments. Net debt was $11.6bn. Visa returned $9.2bn to shareholders over the quarter.
The upper end of the range for 2026 revenue guidance has increased and visa now expects low-double-digit to low-teens growth. Guidance for operating expense growth also moved higher.
The shares were up 8.7% in early trading on the morning following the announcement.
Our view
Visa’s first-quarter performance has boosted its credentials as a destination for investors to shelter in stormy conditions. In a period when the macroeconomic outlook has deteriorated, Visa posted its fastest revenue growth in 4 years, and the results were well-received on the day.
Guidance was also positive, but with costs creeping higher, there is some pressure to maintain momentum in the topline. With consumer confidence on the fragile side, this can’t be guaranteed.
Volumes in the US are still moving in the right direction but with the cash-to-card transition arguably complete in the US, there are relatively few levers Visa can pull in the event of a slowdown in its largest market. If pressure from Washington results in either a cap on credit-card lending rates or processing fees, Visa’s revenue streams are likely to be negatively affected.
Visa’s cash generation continues to impress. Surplus funds are being returned to shareholders through a combination of dividends and share buybacks. The emphasis is on the latter, meaning the prospective yield is a modest 0.9%. Remember, no shareholder returns are guaranteed.
Competition from start-ups and established rivals remains a risk to monitor. More recently, a change in regulatory attitudes towards the acceptance of cryptocurrencies, in particular asset-backed stablecoins in mainstream payments, has been called out as a potential threat to the dominance of the card networks. If Visa plays its cards right, it also presents an opportunity, but strong execution and investment in new capabilities will be key.
It’s also positioning itself as a key partner to merchants in an increasingly complex payments landscape. AI-driven or ‘Agentic’ commerce has the potential to further strengthen Visa’s position in the payments ecosystem, as well as drive demand for its growing range of services, such as cybersecurity and data analytics.
Visa’s model is more weighted towards payments than its key rival, Mastercard, which is shifting at a quicker pace towards data and analytics. That leaves it more exposed if margins decline in the traditional business
Long-term, we see payments in general as an attractive business. Visa's business model means that additional transactions are virtually costless, so extra revenue turns straight into profit. It’s not the fastest-growing of the card networks, but we think a disconnect has emerged between market sentiment and the company’s good growth trajectory.
If Visa continues to meet guidance, there could be some attractive upside on offer. However, regulatory and macroeconomic uncertainty are both key near-term obstacles.
Environmental, social and governance (ESG) risk
The technology sector is generally medium/low risk in terms of ESG, though some segments are more exposed, like Electronic Components (environmental risks) and data monetisers (social risks). Business ethics tend to be a material risk within the tech sector, ranging from anti-competitive practices to intellectual property rights. Other key risks include labour relations, data privacy, product governance and resource use.
According to Sustainalytics, Visa’s management of ESG risks is strong.
Visa has a board-level committee that oversees its ESG strategy and related responsibilities and places a noticeable emphasis on ethics training. Visa has been and continues to be subject to anti-competitive related lawsuits; ongoing litigation alleges that Visa has abused its dominant market position to fix fees paid by merchants. It has implemented measures to monitor and mitigate data breaches and cyberattack. The company commits to a diverse and inclusive workplace and has implemented a target across its US workforce to increase historically underrepresented employees by 50% by 2025.
Visa key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.