Mastercard Inc (MA) Common Stock
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HL comment (30 October 2025)
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Mastercard’s third quarter revenue grew by 15% to $8.6bn when ignoring currency moves, slightly ahead of market forecasts.
Payment network revenue growth of 10% was propped up by overseas volume growth of 13% compared to just 7% in the US. Growth in Value-added Services and Solutions was higher at 22%.
Underlying operating income rose by 23% to $5.1bn.
Free cash flow was up from $9.6bn to $12.3bn helped by higher profits and improved cash generation. Period end net debt was $8.7bn.
Full year guidance was largely unchanged, except for the outlook on operating expense growth which has been increased slightly to around 10%.
Mastercard repurchased $3.3bn shares and paid out $0.7bn in dividends.
The shares were flat in pre-market trading.
Our view
Mastercard’s third quarter perfectly illustrated how its strong services offering and diverse geographical footprint can offset slower growth in the more mature US payments network. However, lack of a further upgrade meant there was little to excite investors on the day.
Despite fierce competition in the rest of the payments world, the card networks remain dominated by two giants: Visa and Mastercard. These networks enable banks to issue credit and debit cards without either network having to take any credit risk.
Notwithstanding the emergence of competing payment methods, card usage continues to grow and the model has proved its resilience through multiple economic ups and downs. However, it’s impossible to rule out another dip in fortunes.
Despite the proliferation of payment methods, many of the newer kids on the block, such as Apple Pay and PayPal, still rely on cards for a big chunk of their transactions. The rise of cryptocurrencies is another potential threat, but it’s not something Mastercard is ignoring, choosing to partner with some key players in the space.
Services are also an important and faster-growing part of the business and one where Mastercard appears to be stealing an edge over its rivals. Growth is being driven by demand for cybersecurity and data analytics. That’s also helping Mastercard to steal more market share in the United States, winning key partnerships with key merchants like American Airlines, in what is now a mature market. Cash-to-card migration has all but run its course across the pond.
In an effort to win over more customers, rebates and incentives are also on the rise. Strong cashflows mean these are commitments Mastercard can currently afford. Despite this added layer of cost Mastercard’s strong customer proposition still leaves further scope to improve its already robust margins.
However, Mastercard has a more even geographical mix than its main rival, which is particularly dominant in the United States. That gives it more exposure to overseas markets where there’s still an underlying tailwind blowing in Mastercard’s favour.
We think Mastercard’s growth prospects look better than much of the competition, due to some of the structural differences discussed above. That’s reflected by growth forecasts ahead of the peer group in both the short and medium-terms. If management can deliver, we think there’s some attractive upside on offer. The macro environment has a part to play here, and overall remains resilient, but with plenty of economic risks still on the horizon there’s room for some ups and downs yet.
Mastercard key facts
Forward price/earnings ratio (next 12 months): 29.9
Ten year average forward price/earnings ratio: 30.7
Prospective dividend yield (next 12 months): 0.6%
Ten year average prospective dividend yield: 0.6%
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.
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