Visa Inc. (NYSE:V) saw its shares dip in premarket trading on Wednesday, even after reporting fiscal third-quarter earnings that surpassed analyst expectations. The stock, which closed Tuesday at $366.59, was indicated about 0.3% lower near $365.59, as investors focused on a notable divergence between robust payment volume growth and slower international transaction revenue.
Earnings and Revenue Beat Estimates
For the quarter ended June 30, Visa posted adjusted earnings of $3.32 per share, topping the LSEG consensus estimate of $3.23. Revenue came in at $11.63 billion, also ahead of the $11.39 billion forecast. The results underscored the company's dominant position in global payments, with payments volume surpassing $4 trillion for the first time, up 10% on a constant dollar basis. Processed transactions reached 71.7 billion, also climbing 10% year-over-year.
Cross-Border Revenue Growth Disappoints
Despite strong volume trends, a key area of concern emerged in Visa's international segment. Cross-border volume, excluding intra-Europe transactions, rose 12% in constant dollars, but revenue from international transactions grew only 6%. The disparity, while not a direct yield comparison—volume is measured in constant dollars while revenue is nominal—signals that the company is not fully capturing the benefit of increased cross-border spending.
Visa attributed the gap to changes in currency exchange rates and a shift in business mix, including a larger proportion of lower-yield money movement flows such as Visa Direct. The trend also showed up in the company's quarterly metrics: net revenue growth slowed to 14% from 17% in the prior quarter, while international transaction revenue growth decelerated sharply from 10% to 6%.
Cost Pressures and Restructuring
Expenses remained a significant headwind. Adjusted operating costs rose 17%, outpacing revenue growth of 14%. Client incentives, a key cost for the network, increased 18%, further pressuring margins. In response, Visa announced plans to cut approximately 2,600 jobs, or 7% of its workforce, primarily in technology and product divisions. The company recorded a $563 million severance charge in the quarter. Visa stated that cost savings will be redirected toward higher-growth areas such as acceptance offerings, value-added solutions, stablecoins, and AI-powered commerce, suggesting that a near-term margin expansion is unlikely.
Services Segment Provides a Hedge
Visa's services segment offered a bright spot, with revenue from value-added services climbing 34% in constant dollars to $3.8 billion, representing about one-third of net revenue. This diversification helps mitigate some of the pressure from slower transaction revenue growth.
Capital Returns Boost Per-Share Growth
Share buybacks continued to support earnings per share growth. Adjusted net income rose 8%, while adjusted EPS increased 11%, a three-percentage-point difference driven by a reduced share count. Visa repurchased 14.5 million shares during the quarter at a total cost of $4.9 billion, an average price of $330.71—nearly 10% below Tuesday's closing price.
Consumer Spending Resilient, World Cup Provides Tailwind
Consumer demand remained steady, with CEO Ryan McInerney stating that consumer and business spending “remains resilient.” The World Cup provided a short-term boost, with CFO Chris Suh reporting that card-present transactions increased by up to 20% in certain host cities during match days, driven by restaurants and entertainment spending.
Outlook and Industry Context
For the fourth quarter, Visa expects revenue to rise toward the upper end of the low double-digit percentage range, with adjusted EPS growth at the bottom of the mid-teens. For the full fiscal year, the company's outlook points to revenue growth at the low end of the low-teens and EPS growth at the low end of mid-teens.
Mastercard (NYSE:MA) is scheduled to report its second-quarter earnings on Thursday, and investors will closely watch its cross-border revenue and incentive trends to determine whether Visa's conversion gap is industry-wide or company-specific.
Risks remain, including the normalization of World Cup-related spending, rising incentive costs, and potential softening of consumer activity. Visa also recorded a $237 million litigation charge during the quarter. Nonetheless, the company continues to demonstrate strong demand signals, and the next challenge will be converting double-digit volume growth into higher revenue and profits without increasing reliance on share repurchases.
