Visa Inc. (V) Q1 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

Visa's earnings call highlights strong financial performance, with significant growth in Visa Direct transactions and value-added services. The company maintains optimistic guidance, supported by strategic events like the Olympics and World Cup. Despite increased operating expenses, Visa's robust growth in commercial payments and strategic investments in AI and innovation are promising. The Q&A session revealed strong analyst interest and positive sentiment, though some uncertainty remains around regulatory impacts and sustainability of VAS growth. Overall, the earnings call indicates a positive outlook for Visa's stock price in the near term.

Key Financial Performance

Net Revenue Net revenue increased by 15% year-over-year to $10.9 billion. This growth was driven by strong value-added services revenue, lower-than-expected incentives, and stronger-than-expected commercial and money movement solutions revenue.

Earnings Per Share (EPS) EPS grew by 15% year-over-year to $3.17. The growth was primarily due to stronger-than-expected net revenue growth.

Payments Volume Payments volume grew by 8% year-over-year in constant dollars to nearly $4 trillion. This reflects resilient consumer spending.

Processed Transactions Processed transactions increased by 9% year-over-year to 69 billion transactions, demonstrating strong consumer activity.

Cross-Border Volume Cross-border volume excluding intra-Europe grew by 11% year-over-year in constant dollars. This was supported by strong commercial volumes and improvement in U.S. inbound from Canada.

Commercial Payments Volume Commercial payments volume grew by 10% year-over-year in constant dollars, driven by strong client performance and cross-border strength.

Visa Direct Transactions Visa Direct transactions grew by 23% year-over-year to 3.7 billion transactions, with strength in both domestic and cross-border transactions.

Value-Added Services Revenue Value-added services revenue grew by 28% year-over-year in constant dollars to $3.2 billion. This growth was driven by greater demand for advisory and other services, especially in marketing services.

Operating Expenses Operating expenses grew by 16% year-over-year, primarily due to unfavorable FX impact from balance sheet remeasurement and higher-than-expected marketing expenses.

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Operating Highlights

Visa as a Service stack: Innovations in Visa credentials, agentic commerce, stablecoins, B2B and P2P money movement, issuer processing, and risk and security. Enhanced Tap to Pay, Visa Flex Credential, and Tokens.

Visa Flex Credential: Block launched a pilot of Cash App Visa Debit Flex Card, enabling Afterpay and leveraging Visa's DPS issuer processing solution. 20 million Visa Flex Credentials globally, with plans to expand to 20 additional issuers this year.

Visa Token: 17.5 billion tokens globally, over 3x the number of physical cards. Progress in tokenization of e-commerce transactions, reducing guest checkouts, and enhancing data sharing for secure e-commerce.

Agentic commerce: Visa Intelligent Commerce solution with over 30 partners actively building in sandbox environments. Expanded into B2B agentic payments with Ramp and partnerships with AWS, Cloudflare, and Akamai.

Stablecoins: Expanded stablecoin card issuance to over 50 countries. Stablecoin settlement capabilities with USDC in the U.S. reached an annualized run rate of $4.6 billion globally. Launched stablecoins advisory practice and piloted Visa Direct stablecoin payouts.

Global expansion: Enabled Apple Pay for Visa cards issued in China for cross-border transactions. Expanded Tap to Phone to 20 new markets, growing acceptance locations to 175 million globally. Expanded Visa Direct cross-border reach to over 60 markets.

Regional partnerships: Partnerships with Revolut in Europe and Edenred PayTech for B2B use cases. Pismo's first commercial offering with Banco BICE in Chile and fleet card offering with Finance Now in New Zealand.

Risk and security solutions: Expanded Visa Account Attack Intelligence globally, preventing $10 billion of fraud in LAC. Expanded Visa Advanced Authorization and Visa Protect for A2A to more countries.

Issuer processing: Pismo's first commercial offering with Banco BICE in Chile and fleet card offering with Finance Now in New Zealand. Enhanced DPS and issuer processing capabilities.

Value-added services: Revenue grew 28%, driven by demand for advisory and marketing services. Represented 50% of overall revenue growth in Q1.

Commercial and money movement solutions: Revenue grew 20%, driven by 10% commercial payments volume growth and 23% Visa Direct transaction growth.

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Risk or Challenges

U.S. Debit Volume Decline: A Visa Direct client moved the remainder of its volume to its own solution, and there was a loss of some Interlink volumes to the Capital One debit migration. This caused a slight step down in U.S. debit payment volume.

Lower-than-Expected Currency Volatility: Visa experienced lower-than-expected currency volatility, which negatively impacted international transaction revenue.

Higher Operating Expenses: Operating expenses grew 16%, above expectations, due to unfavorable FX impacts from balance sheet remeasurement and higher-than-expected marketing expenses.

Regulatory and Legal Risks: Visa funded a litigation escrow account by $500 million, indicating ongoing or potential legal challenges.

Economic Uncertainty: Visa assumes the macroeconomic environment will remain stable, but any significant changes could impact consumer spending and overall business performance.

Cross-Border Volume Mix Pressure: Negative pressure from cross-border volume mix and hedging impacted international transaction revenue.

Incentive Growth Impact: Client incentives grew 12%, with expectations of higher growth in Q2 and Q3, which could impact net revenue.

Volatility in Stablecoin and Blockchain Adoption: Stablecoins and blockchain technologies are in early stages of adoption, and their growth potential is uncertain, posing risks to Visa's investments in these areas.

Fraud and Security Risks: Visa continues to face risks related to fraud and security, as evidenced by its investments in AI-driven fraud prevention solutions and the expansion of risk solutions globally.

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Guidance & Outlook

Revenue Growth: Visa expects full-year adjusted net revenue growth to be in the low double digits, reflecting a weaker volatility environment for the rest of the year offset by Q1 outperformance and higher utilization of products and services.

Operating Expense Growth: Full-year adjusted operating expense growth is expected to be in the low double digits.

Tax Rate: Visa anticipates a full-year tax rate between 18% and 18.5%, lower than previously guided due to claim of right tax benefits related to legal settlements. Long-term tax rate is expected to remain between 19% and 20%.

EPS Growth: Adjusted EPS growth for the full year is expected to be in the low double digits, slightly higher than previously guided due to the change in tax rate.

Q2 Revenue Growth: Visa expects Q2 adjusted net revenue growth in the low double digits, with a step down from Q1 due to lower pricing contribution, lower volatility, and higher incentive growth.

Q2 Operating Expense Growth: Adjusted operating expense growth in Q2 is expected to be in the mid-teens, about 1 point above Q1 growth, driven by marketing-related expenses for the Olympics and FIFA.

Q2 EPS Growth: Adjusted Q2 EPS growth is expected to be in the high end of low double digits.

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Shareholder Return Plan

Dividends distributed: In Q1, Visa distributed approximately $1.3 billion in dividends to shareholders.

Share buyback program: Visa repurchased approximately $3.8 billion in stock during Q1. Additionally, $500 million was funded into the litigation escrow account, which had the same effect on EPS as a stock buyback. At the end of December, $21.1 billion remained in Visa's buyback authorization.

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Key Q&A

Q:What are the opportunities around value-added services, specifically for events like the Olympics and World Cup?

A:Visa leverages marquee sponsorships like FIFA and the Winter Olympics to create bespoke programs for clients. These include advertising campaigns, sweepstakes, and private banking events. These initiatives deepen client partnerships, generate revenue, and drive renewals.

Q:What is driving Visa's ability to maintain its full-year revenue growth guidance despite lower-than-expected FX volatility?

A:Strong performance in value-added services (VAS) and CMS, with broad-based growth across issuing solutions, acceptance, risk and security, and advisory. Q1 momentum offsets the downside from low FX volatility.

Q:Has Visa considered changes to its capital return strategy given current market valuations?

A:Visa's approach to capital return and share buybacks remains programmatic, but the company is open to leaning in when it sees opportunities where the market undervalues its stock.

Q:What are Visa's thoughts on the regulatory environment, specifically regarding the CCCA?

A:Visa opposes the CCCA, citing its harmful and unnecessary nature. The company actively educates elected officials about the competitive environment and the potential negative consequences of the legislation, such as reduced credit access, fewer rewards, and weaker security protections.

Q:What drove the better-than-expected growth in commercial and spending trends globally?

A:Visa's strategy in commercial includes converting small and medium business spending, scaling large and middle market card use cases, and delivering product innovation. Examples include the Chase Sapphire Reserve for Business and Trip.com virtual travel card. Spending trends show stable international volume growth, with regional variations due to timing differences.

Q:Can the 28% growth in value-added services (VAS) in Q1 be sustained for the rest of the year?

A:While Visa does not guide to growth pillars, the 28% growth reflects strong execution and client demand. Events like FIFA World Cup and the Olympics contribute to this growth, but expenses related to these events may cause quarterly variability.

Q:What is the growth trajectory and potential impact of the Flex Credential?

A:Flex Credential is in its early stages but has strong client interest. It offers multiple funding options in one card, appealing to traditional banks and BNPL players. While small now, it follows a strategy similar to tokenization and Visa Direct, aiming for long-term growth.

Q:What is the status and potential of Visa's issuer processing business, including DPS and Pismo?

A:Visa sees enormous TAM in issuer processing as banks modernize their tech stacks. Pismo, a cloud-native platform, supports fintechs' international expansion and traditional banks' transition to the cloud. Sales cycles are long, but client interest is strong.

Q:What is Visa's perspective on stablecoins and their growth potential?

A:Visa sees stablecoins as having product-market fit in regions with high currency volatility and for cross-border payments. Stablecoins enable 7-day settlement, improving liquidity for partners. However, Visa does not see significant fit for stablecoin payments in developed digital payment markets.

Q:How does tokenization impact Visa's conversations with issuers, merchants, and acquirers?

A:Tokenization improves authorization rates and reduces fraud, resonating with merchants and acquirers. Visa focuses on converting stored credentials to tokens, reducing guest checkout, and expanding tokens to new markets. The goal is 100% tokenized transactions.

Q:Review of Unclear Management Responses

A:Management avoided directly addressing the sustainability of 28% VAS growth for the rest of the year, citing variability due to events like FIFA and the Olympics. Additionally, while discussing the regulatory environment, the response on CCCA was broad and lacked specific details on potential outcomes or strategies.

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Earnings Word Cloud

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

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The earnings call summary and Q&A indicate strong financial performance with 23% revenue growth and 11% cross-border volume increase. Visa's strategic focus on agentic commerce and AI integration shows innovation and potential for future growth. The lack of significant changes in consumer spending habits and strong holiday sales outlook further support a positive sentiment. While there are some uncertainties in agentic commerce timelines, the overall outlook remains robust, suggesting a positive stock price movement in the short term.

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Frequently Asked Questions

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