Visa Inc. (V) Q3 2025 Earnings Call Transcript

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Overview

The earnings call summary shows strong financial performance with significant growth in revenue, EPS, and Visa Direct transactions. The Q&A session highlighted management's optimism about stablecoins and Visa Direct's growth, although some uncertainty remains about future plans. The unchanged full-year guidance and new share repurchase program further support a positive outlook. Despite some deceleration in Q4 due to one-time impacts and higher incentives, the overall sentiment remains positive, suggesting a 2% to 8% stock price increase over the next two weeks.

Key Financial Performance

Net Revenue $10.2 billion, up 14% year-over-year. The increase was driven by lower incentives, a lower FX headwind, and higher value-added services revenue.

Earnings Per Share (EPS) $2.98, up 23% year-over-year. The growth was primarily due to the strength in net revenue growth.

Payments Volume Global payments volume grew 8% year-over-year in constant dollars. U.S. payment volume grew 7%, and international payments volume grew 10%. The growth was attributed to strong consumer spending and e-commerce growth.

Cross-Border Volume Excluding intra-Europe, cross-border volume rose 11% year-over-year in constant dollars. This was supported by strong retail spend in e-commerce and travel.

Processed Transactions Processed transactions grew 10% year-over-year. The growth was driven by increased consumer activity and digital payment adoption.

Commercial Payments Volume Commercial payments volume grew 7% year-over-year in constant dollars. The growth was due to the lapping of certain portfolio losses.

Visa Direct Transactions Visa Direct transactions grew 25% year-over-year to 3.3 billion transactions. The growth was driven by strength in both domestic and cross-border P2P transactions.

Value-Added Services Revenue Revenue was $2.8 billion, up 26% year-over-year in constant dollars. The growth was driven by strength across all portfolios and pricing.

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Operating Highlights

Visa-as-a-service stack: Continued evolution to advance product developments, including AI and stablecoins, across consumer payments, commercial and money movement solutions, and value-added services.

Flex Credential: Expanded geographically with inaugural clients in Vietnam, the Philippines, and Bangladesh. Klarna launched a Klarna Card powered by Flex Credential in the U.S. and Europe.

Visa Intelligent Commerce: Enables consumers to shop and buy with AI agents. More than 30 partners are testing in a live sandbox, with live transaction pilot phase soon.

Tap to Everything: Tap to Pay penetration reached 78% globally. Tap to Phone added 3 million transacting devices this quarter.

Visa Infinite Privilege: Launched in Brazil as a super premium offering for affluent consumers.

Visa A2A: Focused on non-carded solutions like account-to-account payments in the U.K. and open banking in Europe and Latin America.

Stablecoins: Deployed stablecoin-linked cards in multiple markets and expanded support for stablecoin settlement on Visa network. Focused on emerging markets and cross-border money movement. Expanded capabilities with new stablecoins and blockchains.

Geographic Expansion: Expanded Flex Credential to Vietnam, the Philippines, and Bangladesh. Renewed partnerships in Africa and India. Expanded Visa Direct in Bangladesh and U.S./Canada.

Open Banking: Focused on Europe and Latin America, including Visa Conecta in Brazil.

Commercial Solutions: Expanded partnerships in Europe and U.S. for travel, fleet, and fuel verticals.

Tokenization: More than 50% of global e-commerce transactions are tokenized, nearing 15 billion tokens.

Visa Direct: Transactions grew 25% year-over-year, with new partnerships in UAE, Bangladesh, and U.S./Canada.

Value-added Services: Revenue grew 26% year-over-year, driven by issuing, acceptance, risk, and advisory solutions.

AI and Innovation: Investing in AI-driven solutions like Visa Intelligent Commerce and enhancing digital engagement.

Client Relationships: Renewed and expanded partnerships globally, including Absa in Africa and HDFC in India.

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Risk or Challenges

Regulatory Challenges: Visa expressed support for the GENIUS Act, which aims to provide regulatory clarity for stablecoins. However, the evolving regulatory landscape for stablecoins and cryptocurrencies could pose challenges to Visa's operations and strategic initiatives in this space.

Currency Volatility: Visa noted the impact of weaker currencies in certain countries and the Canada-to-U.S. travel corridor, which affected cross-border volume growth. This currency volatility could continue to impact revenue and transaction volumes.

Macroeconomic Uncertainty: Despite resilient consumer spending, Visa acknowledged the potential for macroeconomic impacts on its business, including economic slowdowns or shifts in consumer behavior.

Competitive Pressures: Visa faces competition in the payments and money movement space, particularly in emerging technologies like stablecoins and open banking, which could impact its market share and growth.

Supply Chain and Operational Risks: Visa's expansion into new technologies and markets, such as stablecoins and AI-driven commerce, requires significant operational adjustments and could face implementation challenges.

Cross-Border Transaction Risks: Cross-border volume growth, while strong, is subject to variability due to factors like currency weakness and geopolitical conditions, which could impact Visa's revenue streams.

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Guidance & Outlook

Revenue Growth: Visa expects adjusted net revenue growth in the high single digits to low double digits for Q4 2025. On a nominal basis, Q4 net revenue growth is expected to align with the first half of FY 2025 nominal net revenue growth, which was about 10%.

Operating Expenses: Adjusted operating expenses are expected to grow in the high single digits to low double digits for Q4 2025.

Nonoperating Income: Nonoperating income in Q4 2025 is expected to be minimal.

Tax Rate: The tax rate for Q4 2025 is expected to be between 18.5% and 19%.

EPS Growth: Adjusted EPS growth for Q4 2025 is expected to be in the high single digits.

Full Year Guidance: Visa expects full-year adjusted net revenue growth and EPS growth to be stronger than previously anticipated, despite no changes to the full-year adjusted guidance ranges.

2026 Planning: Visa is planning for 2026 with confidence, considering a variety of economic scenarios, and expects to continue making investments to build the future of payments and drive long-term growth.

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Shareholder Return Plan

Dividends distributed: $1.2 billion in dividends were distributed to stockholders during the quarter.

Stock buyback: Approximately $4.8 billion in stock was repurchased during the quarter.

Remaining buyback authorization: At the end of June, $29.8 billion remained in the buyback authorization.

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Key Q&A

Q:Can you provide more color on the fourth quarter guide and the deceleration from the third quarter?

A:Christopher Suh explained that Q4 is expected to be fundamentally strong with resilient consumer spending. The deceleration from Q3 is due to lower currency volatility and higher incentives in Q4 compared to Q3. Q3 benefited from one-time incentives and higher currency volatility, while Q4 is lapping onetime impacts from the previous year.

Q:Are investment priorities changing given the focus on AI and stablecoin?

A:Ryan McInerney stated that investment priorities remain unchanged, with a focus on a deep and rich product pipeline. Christopher Suh added that Q3 OpEx was higher due to FX benefits being less than expected and higher personnel costs, but Q4 OpEx is expected to grow in line with revenue.

Q:Can you expand on the spread between international transaction fees and nominal cross-border volume?

A:Christopher Suh explained that the spread was less than 1 point due to higher currency volatility, hedging losses, and mix changes. U.S. inbound travel, a higher-yielding corridor, was impacted by Canada to U.S. volume.

Q:Can you discuss Visa Direct's growth and pricing dynamics?

A:Ryan McInerney highlighted Visa Direct's growth, crossing 10 billion transactions on a rolling 12-month basis. Banks are embedding Visa Direct for cross-border money movement. Pricing varies by vertical, use case, and region, with yields similar to the global debit business.

Q:Is the Street's expectation for an acceleration in volume transaction in fiscal '26 realistic?

A:Ryan McInerney and Christopher Suh stated that they see tremendous opportunities across growth engines but are still in the planning phases for FY '26. They will provide more details in the next earnings call.

Q:What is Visa's perspective on stablecoins in the remittance space?

A:Ryan McInerney sees stablecoins as having product market fit for remittances and cross-border transactions. Visa is testing corridors where stablecoins can provide faster and cheaper money movement, benefiting both end users and clients.

Q:Has the growth in VAS been helped by services and consulting on stablecoins?

A:Ryan McInerney confirmed that Visa's advisory business, including crypto advisory, has been strong. Clients rely on Visa for strategies, and this leads to opportunities to embed products like the Visa Tokenized Asset Platform.

Q:What is the right way to think about incentives in Q4 and heading into '26?

A:Christopher Suh explained that Q4 incentives are expected to be the highest growth quarter of FY '25 due to lapping onetime items and deal timing. FY '25 has a higher volume of renewals, but the focus remains on driving net revenue growth.

Q:Can you explain the pricing dynamics in data processing and the timing of incentives?

A:Christopher Suh stated that pricing benefits in FY '25 are back-half weighted, leading to stronger revenue growth in Q3 and Q4. FY '25 has more deal activity due to a higher volume of renewals, which can vary in timing.

Q:What are the cross-border trends, especially in travel?

A:Christopher Suh noted that cross-border growth in Q3 was 11%, with variations due to holiday timing, currency impacts, and corridor-specific factors like U.S. to Canada. July showed improvement, and overall cross-border volume remains strong above pre-COVID levels.

Q:Does Visa see stablecoins as diluting or adding to the revenue TAM in payments?

A:Ryan McInerney believes stablecoins can accelerate progress in digitizing consumer and business payments, especially in emerging markets and cross-border remittances. Stablecoins are seen as an opportunity to expand Visa's reach.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on FY '26 plans, stating they are still in the planning phases and will provide more information in the next earnings call. Additionally, while discussing stablecoins and their impact on revenue TAM, the response was optimistic but lacked concrete numerical projections or timelines.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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