Net revenue was up by 14% to $11.6bn ($11.4bn expected), outpacing payment volume growth of 10%, supported by strong growth in data processing revenues, cross-border volumes and value-added services.
Adjusted net profit rose by 8% to $6.3bn, held back by higher marketing and personnel expenses.
Free cash flow fell from $6.3bn to $6.1bn, and net debt came in at $11.5bn. In the third quarter, Visa spent $6.2bn on dividends and buybacks.
Visa tightened its revenue and cost outlook and nudged earnings per share expectations higher to the low end of the mid-teens range.
The shares fell 2.3% in pre-market trading.
Our view
Visa turned in another resilient third-quarter performance. But with the shares trading strongly ahead of the print, the guidance upgrade closed the gap only with market forecasts, and investors took some profits after the results.
Further cost improvements could support profitability, but we’ll want evidence of genuine efficiencies rather than resource being pulled from the company’s growth engines.
US volumes were helped by the World Cup, but under the bonnet things are still moving in the right direction. However, with the cash-to-card transition arguably complete in the US, there are relatively few levers that Visa can pull in the event of a slowdown in its largest market.
Regulatory pressure is another watchpoint. A revised US settlement covering card processing fees looks like a relatively positive outcome for the networks, though final approval is still needed and objections could delay or reshape the deal.
Competition from start-ups and established rivals is another monitor. Currently, 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.
In terms of disruptive forces, changes 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 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 that the prospective yield is a modest 0.8%. Remember, no shareholder returns are guaranteed.
Long term, payments remain structurally attractive, with Visa’s scale and global reach leaving it well placed to benefit. Its resilience and strategic position have been increasingly recognised by the market this year, raising the bar for earnings growth to drive future returns. It has a strong track record of beating forecasts, but the macro backdrop remains uncertain, and any break from that pattern is likely to disappoint.
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 that yields are variable and not a reliable indicator of future income. Keep in mind that 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.