Underlying net revenue increased 12%, before currency moves, to $9.3bn. Payment network revenue was up by 8% while value-added services grew by 18%.
Slower expenses growth of 10% allowed operating profit to increase by 14% to $5.6bn.
First-half free cash flow fell from $6.8bn to $6.3bn, reflecting the timing of expense payments. Net debt was $13.4bn at the end of the period, after $5.7bn was returned through dividends and buybacks.
Full-year underlying growth guidance was unchanged, with net revenue at the high end of low double digits and expenses at the lower end.
The shares ended the day up 2.5%.
Our view
Mastercard delivered a strong second quarter. While management chose not to raise guidance, the performance was enough to keep investor sentiment moving in the right direction.
Mastercard has a more even geographical mix than its main competitor, Visa, who is particularly dominant in the United States, where cash-to-card migration has all but run its course. That gives it more exposure to overseas markets where there’s still an underlying tailwind blowing in Mastercard’s favour.
However, recent revenue growth has lagged Visa’s. Exposure to disruption in the Middle East, alongside favourable World Cup-related tailwinds for its rival, has distorted the comparison. But we don’t expect this to become an embedded trend. Cross-border spending is still likely to be uneven, which could create some bumps along the way. Some regulatory uncertainty appears to be easing, but retailers and other businesses are still pushing for better pricing, so fee pressure remains a risk to monitor.
Card usage continues to grow, helped by the rise of contactless payments and digital wallets. The threat of technological disruption is one to watch, but Mastercard’s enormous scale also positions it as an enabler of change. The group’s shown it’s not afraid to move with the times, securing key partnerships with the likes of Apple and cryptocurrency payment provider Ripple. This scale also provides an opportunity to capture a bigger part of the value chain within each transaction.
Services are an important and faster-growing part of the business and one where Mastercard appears to be stealing an edge over its rivals. Its cybersecurity and data analytics capabilities leave it well placed to deepen its relationships with vendors as artificial intelligence adoption changes the way they engage with retailers.
Mastercard is also leaning into the emerging opportunity from agentic commerce. Its Agent Pay work is already supporting live agentic transactions, while partnerships with more than 30 industry players suggest the group is positioning its network to permission, orchestrate and settle machine-led payments at scale. That could help Mastercard stay central to the payments flow as AI-powered shopping and automated transactions become more mainstream.
Mastercard remains a quality company at the centre of the payments ecosystem. Its growth prospects look attractive, supported by a more diversified international footprint and greater exposure to services, which remain a faster-growing part of the business. Resilient results so far this year have helped the valuation move past fears of a sharper slowdown linked to the Middle East conflict. Earnings growth could still support further upside, but there’s less room for disappointment from here.
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, Mastercard’s management of ESG risks is strong, with board-level supervision, and ethics and compliance monitoring processes in place. The company has also invested heavily in cybersecurity where alongside data privacy there are strong training programmes in operation. A key ESG conduct risk for Mastercard is continued antitrust scrutiny, which could lead to fines, settlements or changes to business practices; although the company maintains provisions and significant resources to manage legal challenges, the uncertainty surrounding some proceedings highlights ongoing financial and reputational risk.
Mastercard 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.