Visa earnings beat Wall Street estimates on strong holiday spending | PaymentsSource

UPDATE: This article includes executive and analyst commentary.

Visa’s diversification strategy includes a push to gain a larger share of business with large technology companies, a quest that got a big jolt this week through a partnership with the social media platform X.

The card brand’s Visa Direct transfer app will support the ability to move money from a bank account to X Money’s digital wallet accounts, a move that adds to Visa’s partnership initiative, according to Visa CEO Ryan McInerney.”The X partnership is a great example of a list of fintech, crypto, digital wallet and social messaging apps” that Visa has worked with, McInerney said during Thursday’s Visa earnings call.

Visa Direct has more than 600 million users globally, covering a wide range.

“Creators, for example, will be able to get paid faster,” McInerney said. Visa has entered partnerships with more than 70 cryptocurrency companies including Coinbase and Crypto.com; and Visa’s collaboration with large technology developers includes a partnership with Apple to power virtual cards.

Visa’s earnings

News of the X/Visa partnership broke this week, shortly before Visa’s earnings report, which exceeded analysts expectations.

For the quarter ended Dec. 31, Visa reported net revenue of $9.5 billion, up 10% from the prior year, and non-GAAP earnings per share of $2.75. That beat Zacks Investment Research analyst survey prediction of $9.34 billion in net revenue and adjusted EPS of $2.66. Payments volume was up 9% and processed transactions were up 11%.

“Visa’s strong first-quarter results reflected healthy spending during the holiday season and improving trends in payments volume, cross-border volume and processed transactions growth,” McInerney said during his presentation on Thursday.

Holiday spending and cross-border spending (across both e-commerce and travel) were both more than anticipated, with notable discretionary spending in retail, travel and entertainment, McInerney said, adding the company’s “new flows” strategy saw strong cross-border spending among Visa’s commercial partners continues to gain traction, and calling out the card network’s recently announced partnership with X as an example.

“This was another decent quarter,” said Logan Purk, financial services analyst at Edward Jones, in a research note. “Visa provided updates for the business through the first three weeks of January, which showed processed transactions accelerating from the end of this quarter. This should give investors some confidence that overall spending remains solid.”

Visa projected low double digit EPS growth for the full year 2025. During the earnings call, Visa reported that it has not seen a meaningful change in spending across its customer base. This further supports the view that the U.S. economy has largely achieved a soft landing and that a recession is not imminent, according to Purk.

“We believe [Visa’s] guidance should be just enough to keep investors happy,” Purk said. “These results reinforce our long-term view that Visa remains well positioned to benefit from global payment trends, such as the continued shift to digital payments and contactless payments, which have accelerated in the current environment.”

New payment sources

Similar to Mastercard, Visa focuses on value-added services such as technology, security and consulting to augment its revenue, recently hiring Australian banking executive Antony Cahill to head its global value-added services division. The card brand in late 2024 completed an acquisition of Featurespace, a technology company that uses emerging forms of artificial intelligence to build payment security products, for an undisclosed amount.

Cambridge University’s engineering department developed Featurespace in 2008, and its clients include Akbank, Danske Bank, HSBC, NatWest and Permanent TSB and payment-processing companies Edenred, TSYS and Worldpay.

By completing the Featurespace acquisition, Visa will be able to provide an expanded set of fraud-prevention tools, McInerney said in the card network’s release.New payment sources Visa’s quest to diversify revenue beyond card processing also includes targeting new emerging segments of the economy, such as content creators.

The card brand recently released a social video series called GET P@ID that pairs creators with fashion and music and food consumers for a multiweek, mentor-mentee relationship to help build businesses and careers. The company in late 2024 launched its initial GenVisa Creator Summit in Tokyo during the recent quarter, a program it plans to expand globally. The summit brought together creators with platforms such as TikTok and Amplify, Visa experts, Visa’s clients and financial institutions. Visa also provided information on how to monetize nonfungible tokens.

While only about 4% of content creators earn more than $100,000 per year, according to Goldman Sachs, high earning creators bring in up to $700 million in yearly revenue.

Other Visa moves include enabling payments that are traditionally positioned as alternatives to credit cards. It plans to upgrade its current pay-by-bank model in the U.K. early this year to give customers more control and flexibility around paying bills and managing subscriptions.

Pay-by-bank, or account-to-account payments, enables transactions without involving card networks, though A2A’s growth in popularity provides an opportunity for the card networks to expand their product relationships with issuers.

As part of its pay-by-bank expansion, Visa will implement biometric security, a formal dispute resolution process, and a simpler way to set up and manage payment permissions for utilities, rent and childcare fees. Businesses will be able to access real-time settlement through the U.K.’s Faster Payments real-time processing scheme, include more transactional data for reconciliation and receive notification when a customer changes or cancels payment permissions. Visa aims to gradually expand to cover subscriptions such as streaming services, gym memberships and food boxes.

And buy now/pay later fintech Affirm in the fall of 2024 expanded its partnership with Visa, becoming the initial U.S. partner for Visa’s Flexible Credential, a product that enables consumers to use a single card for different payment options.

Visa’s legal challenges in the most recent quarter include a Department of Justice antitrust lawsuit that alleges the payments company engaged in illegally hindered competition in the debit card market. Visa set aside $1.5 billion to cover that suit and other litigation. 

Among other major credit card companies, American Express last week reported earnings in line with analysts expectations and Mastercard on Thursday reported earnings that beat analysts’ estimates.