Mastercard Incorporated (MA) Earnings & Analysis

Latest quarter

Mastercard reported third-quarter revenue of $9.8 billion, above the consensus estimate of $9.6 billion. Adjusted earnings per share were $5.31, also above the $5.14 consensus. Revenue rose from $8.6 billion a year earlier, while reported diluted earnings per share increased to $5.28 from $4.34.

In its filing, Mastercard attributed revenue growth to both its payment network and value-added services and solutions. Payment network revenue was $5.7 billion, up 11%, as domestic and cross-border volumes, switched transactions and pricing contributed to growth. Services revenue reached $4.1 billion, up 19%, with the company citing demand, underlying activity and pricing.

Mastercard reported an operating margin of 59.8%, compared with 58.8% a year earlier. The filing attributed higher operating expenses primarily to general and administrative costs, including personnel and data processing. It also reported $74 million in quarterly charges, primarily related to settlements with merchants who opted out of U.S. merchant class litigation. Free cash flow was $4.8 billion, down from $5.3 billion a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CFO Ling Hai said third-quarter revenue exceeded Mastercard’s expectations partly because of the timing of services projects and payment network deals. Hai said worldwide gross dollar volume rose 7% on a local-currency basis, cross-border volume grew 11%, and switched transactions increased 9% from a year earlier. He said travel and non-travel spending both contributed to cross-border growth.

Asked about the moderation in cross-border card-not-present spending excluding travel, Hai pointed to lower-yielding intra-Europe activity. He attributed the sequential decline in that activity to an EU customs fee, the timing of retail promotions and lower crypto purchases. Hai said the Middle East conflict continued to affect cross-border travel, but that Mastercard expected travel to remain at a level similar to the end of the second quarter for the balance of the year.

Hai said pricing and mix helped drive assessment growth, alongside payment activity. Asked about pricing, he said Mastercard would look for opportunities to price new functionalities and use cases, while expecting some lapping of earlier pricing as the company headed into the fourth quarter. On services, Hai said 60% were linked to the network and described opportunities to sell more services to existing customers and develop new ones.

Hai attributed expense growth to spending on product innovation, geographic expansion and technology. In response to a question about the fourth quarter, he said services projects accelerated into the third quarter would have an offsetting effect in the next quarter.

CEO Michael Miebach said Mastercard’s small-business deal with HDFC Bank was expected to add 3 million cards to the network. Discussing competition in India, he said Mastercard would both partner and compete. Miebach also said the newly launched Global Money Platform allows financial institutions and fintechs to offer accounts for holding, converting, sending and receiving traditional currencies and stablecoins.

Hai said Mastercard would give formal guidance for 2027 with its next quarterly release. He also said the company expected rebates and incentives as a percentage of assessments to be higher in the fourth quarter than in the third.

Guidance

CFO Ling Hai said Mastercard’s full-year revenue and operating expense growth expectations remained in line with its previous outlook. He said the revenue expectation remained at the higher position within the range communicated after the second quarter.