Last night, after Wall Street closed, Visa reported its quarterly results. The numbers were very strong. Earnings came in above analysts' expectations, annual revenue reached a record, and the company increased its dividend by 16%.
And yet, the stock fell.
How can a company perform so well and still see its share price decline? The answer lies in what Visa expects for the year ahead.
QUARTERLY RESULTS AT A GLANCE
Let's start with the basics. Visa reported earnings per share of $3.48, an increase of 17% compared with last year. Analysts had expected $3.44, so the company beat expectations. And this wasn't the first time. Visa had also beaten earnings estimates in each of the previous eight quarters.
Revenue reached $12.1 billion, up 13%. However, there was no surprise here, as revenue came in exactly in line with analysts' expectations. Net income increased to $6 billion, compared with $5.1 billion a year earlier.
Looking at the full fiscal year, which ended on September 30, Visa generated $45.9 billion in revenue, a record and a 15% increase. That's why CEO Ryan McInerney described it as a milestone year.
The quarterly dividend is also increasing to $0.78 per share, up from $0.67. Visa has raised its dividend every year since 2008, when it went public. During the year, the company also repurchased $20.5 billion worth of its own shares.
So, how exactly does Visa make money?
In simple terms, Visa isn't a bank. It doesn't lend money. It's the payment network that processes transactions whenever you use your card. Visa earns revenue from these transactions.
The more people spend using their cards, the better it is for Visa.
WHAT DROVE THE EARNINGS?
This is where the American consumer comes into the picture. Consumers continue to spend, supported by a strong labor market and wage increases, according to Reuters. People used their cards for travel, shopping, and dining out.
Overall, Visa processed 74.2 billion transactions during the quarter, an increase of 10%. Payment volume rose by 9%.
But the most interesting figure was cross-border spending, meaning payments made when using a card abroad. Excluding transactions within Europe, cross-border payments increased by 14%, compared with 12% in the previous quarter.
Why was growth so strong? One contributing factor was the FIFA World Cup. The tournament brought visitors to the United States, boosting activity across Visa's payment network, according to Reuters.
The impact was also reflected in revenue. Revenue from data processing increased by 16%, reaching $6.2 billion.
WHAT DOES VISA EXPECT FOR 2027?
This is where things get interesting. On Wall Street, yesterday's results matter, but what investors really focus on is tomorrow.
For fiscal 2027, Visa expects revenue to grow at a low double-digit rate, meaning slightly above 10%. Earnings per share are expected to grow at a rate ranging from the low double digits to the low teens.
This year's performance was stronger, with revenue increasing by 15% and earnings per share rising by 16%.
What does that mean?
Visa is expected to keep growing, but at a slower pace.
At the same time, the company is preparing for its next phase of growth. Visa has agreed to acquire BioCatch, a company specializing in fraud detection, for $2.4 billion in cash.
CEO Ryan McInerney made the company's priorities clear, stating that trust is the next growth driver for Visa.
WHY DID THE STOCK FALL?
Immediately after the results were announced, Visa shares fell by more than 1% in after-hours trading.
You might ask why, given how strong the results were.
No single explanation was officially identified. However, the numbers offer some clues.
First, revenue merely met expectations. There was no positive surprise.
Second, payment volume grew by 9%, compared with 10% in the previous quarter. That's a small difference, but investors scrutinize even minor changes in growth rates.
Third, the company itself expects slower growth in 2027 than it achieved this year.
And there's another important factor to consider. Before the earnings announcement, Visa's stock had already gained 14.6% since the beginning of the year. Expectations were therefore already high.
When expectations are high, even very good results may not be good enough.
Mastercard is also due to report its results later this week. That should provide another useful comparison and help investors determine whether Visa's performance reflects a broader trend across the payments industry.